Attractive woman holding hired signIn today’s uncertain economic climate, many small businesses are choosing to hire contract workers to help keep their overhead low. Although these arrangements can be mutually beneficial for the businesses and the freelancers they employ, they can also turn extremely ugly if handled incorrectly.

Short-term contracts can turn into long-term headaches unless you enter into them with some clearly defined goals. As a small business owner, here are some things you should consider before taking on contract workers.

Is your need short-term or long-term?

All businesses experience peaks and valleys. For seasonal businesses and those that require employees with very generalized skills, the contract arrangement makes perfect sense. For others, it might make more sense to hire permanent employees than to incur the expense and hassle of constantly training new contract employees.

How are you at delegating?

One of the biggest mistakes many small business owners make is failing to delegate responsibility to their contract employees. This can lead to frustration for the business owner, who feels disappointment that the workload hasn’t diminished, and the contract worker who feels he or she is  always being micromanaged and second-guessed.

Do you have a detailed job description?

Before hiring a contract employee, be sure to create a highly detailed job description and stick to it. Having a clear understanding of what you expect from your contract employee will help you gauge their job performance.
What are your state’s labor laws regarding contract workers?

Some states have very different labor laws for contract employees than for permanent employees. Some states, for instance, require employers to pay payroll taxes if the contract worker works from their office. Others don’t permit employers to dictate specific work hours for contract workers. Before entering into a contract arrangement, make sure you know your state’s laws as they relate to contract agreements.

Can you pay a competitive rate?

Depending on the skills and experience you’re seeking, you may have to pay a contract worker a higher hourly rate than you would pay a permanent employee. This makes sense considering you probably won’t be offering any benefits and the position won’t provide any long-term job security. Before posting a contract position, do a little research and find out what the going pay rate is for the type of employee you’re seeking.

Do you have a termination policy?

Many contract agreements include a termination date, while others are tied to the completion of specific objectives. But what if the relationship sours prior to the agreed to termination date or before the job goals are met? Make sure your contract includes some very specific performance benchmarks, and stick to them.   Some states have very specific termination guidelines so be sure to document everything to prevent any retaliatory legal actions that might arise from a premature termination of the contract.

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