6 things businesses need to know before hiring contractors

The shift towards contractors has provided companies with more flexibility to hire people for shorter periods or a fixed term, reducing the budgetary impact and risk of hiring during economic uncertainty. A large number of these businesses have not traditionally used contractors, so this is a new way of working for many companies. 

To help businesses looking to hire new contract roles, we’ve put together answers to some of the most commonly asked questions we are receiving. 

Q1: What are the different types of contracts?

Hourly rate contracts  

Whereby you only pay for the hours someone works for an agreed period of time, usually between 1 – 6 months. This is a great option if you need to leverage the flexibility of a contractor. 

Fixed-term contracts

Normally, fixed-term is for longer contracts – most popularly maternity leave or long-service leave, where the person is replacing another worker for a pre-determined period of time. In this option, a candidate is for all intents and purposes, an employee of the organisation and has all the same entitlements as other staff.  

Q2: When should I use fixed-term over hourly contractors?  

Fixed-term contracts are generally best for when you will need someone to step into a role for a set period of time such as to cover a permanent employee going on maternity leave/paternity leave / long service leave or secondment.  

Hourly rate contracts will provide you with a higher level of flexibility, therefore are a good option when you aren’t sure how long you will need someone as you can extend quickly and easily or wrap up with a minimal notice period and only have to pay for the hours the candidate has worked.

Q3: How much will it cost?  

Hourly rate  

The hourly rate figure we will provide you with includes the candidate's rate as well as the other on costs accrued such as Super, WorkCover, Public Liability, Professional Indemnity, Payroll Tax and Labour Hire Licencing registration, as well as our margin.  

The hourly rate to the candidate will be slightly higher than if you are working off a direct calculation from the FTE equivalent, as we build into the fact that they will not be accruing leave, meaning of the two options, this looks slightly more expensive when compared side by side.  

Fixed-term  

There will be an upfront fee payable, which is pro-rata for the contract period.  

Q4: Why do we have to pay hourly contractors more?  

Many contractors that we place are not “career contractors” as such, meaning they are not full-time freelancers. More often than not, they are candidates who have traditionally sat in permanent roles but have found themselves immediately available e.g. Due to redundancy or being stood down. If a candidate like this is going to take on a contract role, you are essentially taking them out of the market for permanent opportunities for a period of time. Whilst the flexibility is great from an employer’s perspective, it can be considered instability to a candidate as well. Based on this, we need to make contract roles look as attractive as possible to these candidates and to ensure we can keep them engaged for the duration of the contract period.  

Q5: How do you know everything is above board with a contractor?  

We’ve all heard in the news about businesses underpaying people and you’ve maybe also heard about the recent legislation that was introduced regarding Labour Hire Licencing laws. This means that only licenced providers can legally employ hourly rate contractors for businesses.  

If your business or organisation uses labour hire workers in Victoria, you should start enquiring with the providers as to their intentions with respect to applying for a licence. You should also start reviewing your agreements with labour hire companies to ensure they appropriately reflect the requirements of the new labour hire scheme.

Q6: What are the next steps to making a contractor a permanent employee?  

Many organisations end up wanting to make their contractors permanent employees. In the case of a fixed-term contract, the balance of the fee would be payable. In regard to an hourly rate contract, depending on the type and length of the contract, we can work with you to come to the cost, as there are often discounts can apply based on time spent within the business.  

Six Degrees are open for business as usual, actively providing professional contractors to our clients who need them provided all Stage 4 Restrictions are met. We can supply Permitted Workers for on-site roles as well as other contractors under a working from home arrangement.

We appreciate that circumstances are complicated by these restrictions, so if you would like some advice about how best to satisfy your resourcing needs please contact us.

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For more information and advice, talk to one of our specialist contracting recruiters today.

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