Connect with us

Labour Complexity

The Ups (and Downs) of Working with Contractors

Smart tips on hiring and managing independent contractors.





An independent contractor is an individual who’s self-employed or hired by an outside organisation to work in another (that is, your) organisation. They are paid by you for work performed according to your specifications. The contractor will bill you for the service.

This individual must work according to the procedures and culture of your business. The length of service may be limited, meaning that you hire them for a specific, finite project, or it may be ongoing. Usually, the independent contractor doesn’t receive fringe benefits from the hiring organisation.

On The Up Side

There are two good reasons to hire an independent contractor: your business doesn’t have the expertise in-house to complete a project; and hiring someone through a third party usually ensures the worker has been screened and is competent. If the worker’s productivity is unacceptable, the person can easily be replaced.

Another reason to take on an independent contractor is when an “extra hand” is needed on a task that’s time or project limited. It’s easy to end the working relationship and avoid any legal complications.

As far as work ethic goes, generally, the notion that you get “an honest day’s work for an honest day’s pay” remains true. The hiring company expects the employee be diligent and get the task done on time and under budget while working well with other employees. On the other hand, the independent contractor expects the employer to be available to answer questions, offer appropriate direction and a suitable working climate, and to pay promptly.

This concept is called the psychological contract. If the independent contractor is hired because they have expertise your regular employees don’t have, then the former can earn the admiration of the latter. In this case, the contractor will usually continue to shine so as to receive ongoing approval. This achievement may even lead to an extension ofthe working contract, which will benefit everyone involved.

On The Down Side

When hiring an independent contractor,there are other factors that could negativly impact the quality of output. These factors are:

  1. Complacency. This would occur if the independent contractor falsely believes that their job skills are so highlyvalued by you that they don’t have to make an effort. The result is that while the work output might be acceptable, it wouldn’t be optimal.
  2. The fact that the employment is time-limited. The independent contractor may work diligently in the beginning, but as time goes by, the quality of their work may falter. If their employment is for a specific period of time, the contractor may rightly assume that once the task is at least halfway complete, you won’t pull the plug on the contractand terminate the contractor.
  3. Decreased productivity due to a lack ofcommitment on the part of the independent contractor. If the job is time-limited, this employee might assume that “doing just enough to get by” will not cause negative ramifications. Indeed, you may find it difficult to terminate a contractor who accomplishes only part of a job. This is especially true if the project has a deadline. The contractor can think that even if their work is just okay, there’s no time for you to terminate them and hire someone new to finish the task.

But this individual owes you a high level of performance that should equal, if not exceed, the standards you set for your own employees. After all, this individual is still working to receive a pay cheque. It’s not uncommon for entrepreneurs to want to give these subcontractors “special treatment” out of fear that if they don’t like the job, they’ll leave.

Managing Independent Contractors

While it’s true they have the freedom to more easily leave your employ, that doesn’t mean you should give them preferential treatment. It could make regular employees jealous, resulting in decreased morale and productivity. There are some ways of managing contractors that are similar to other employees and some that are different.

Things that are similar:

  • Clearly state expected work outcomes.
  • Let the contractor know that you value the work produced.
  • Quickly inform the contractor when output fails to meet your expectations in terms of time, quality, quantity, cost and so on.

Things that are different:

  • Check in with this individual more frequently to determine work satisfaction and challenges.
  • Reinforce the positive aspects of the individual’s performance. Remember, an independent contractor is used to working for various bosses for a variety of time periods. Therefore, while leaving your employ may not have a significant effect on this person, it could have a marked impact on your company’s productivity.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Click to comment

You must be logged in to post a comment Login

Leave a Reply

Labour Complexity

Charity Begins At Home This Festive Season

3 Ways to invest in your own employees.

Nation Builder




We often only think of corporate social investment (CSI) as an organisation’s actions in the surrounding communities (philanthropy and volunteering), but CSI is also inward facing. By promoting employee well-being, your business can be a vehicle for change, not only in the society around it, but also directly in the lives of those working there.

Here are some ways you can invest in your own employees during the festive season:

1. Involve your employees in a higher purpose

This might sound like a bit of circular reasoning, but studies have shown that involving employees in CSI activities has several benefits. People involved in meaningful activities tend to be more motivated and willing to go that extra mile because of the higher good associated with the work. CSI programmes also:

  • Increase co-operative behaviour and employee relationships
  • Enhance the sense of company identity
  • Improve employee retention and commitment
  • Create an attractive company culture.

Related: What’s The Fuss About Corporate Social Investments?

2. Provide the space for physical and mental breaks

The end-of-year and festive period is often a very stressful period. Balancing festive and family duties with increased pressure at work due to colleagues taking leave, looming year-end targets and planning for the next year can take a toll.

You, as the employer, can ease this stress by ensuring that there are systems in place that define holiday working policies. Promote time and productivity management to plan workflows and keep the momentum going in these last weeks of the year. Also make sure you have effective communication strategies in place for plans that are in the pipeline for the new year, so that employees can get their heads around upcoming changes. This will allow employees to plan ahead and build in time to switch off, knowing that all of the boxes have been ticked.

3. Constructive feedback/motivation

Also, take the time to acknowledge and show appreciation for the hard work that your staff has put in throughout the year. As the saying goes “valued employees are valuable employees.”

Continue Reading

Company Posts

How Medical Savings Accounts Are Changing – For The Better

By Jeremy Yatt, Principal Officer of Fedhealth





The concept of medical savings accounts (MSA) emerged in the industry in the early 1990s, reputedly when Discovery founder Adrian Gore was working at Liberty. At that time medical scheme benefits for different kinds of day-to-day healthcare were specified, so for example, you’d get a certain amount of Rands to spend on your over-the-counter medicine, or for optometry services. But this was problematic, as people’s daily medical needs are all so different. So, you’d have medical aid members calling their medical schemes saying, “I haven’t used my spectacle limit this year, so can I transfer it to use on medication instead?”.

The idea for MSAs was to pool these separate benefits into a total Rand amount, that you could then spend how you wanted, and more importantly, retain if you didn’t use them all. Initially, medical schemes were reluctant to follow this idea, as they thought it would lead to under-servicing: medical aid members might be unwilling to spend their savings, and so might not get the proper day-to-day medical attention until it became a crisis and they were hospitalised. However this was not the case, and MSAs proved very popular.

At first, there was no real limit on how much of your contributions as a member could go into your MSA, so most schemes allocated around 40-50%. Many schemes also pushed major medical procedures like MRI scans into savings, which was effectively a way of forcing members to self-fund these costly medical expenses. As a result, the Medical Schemes Act was amended in 1998 to impose a 25% limit on the benefits that could be put into MSAs, which largely forced the schemes to be responsible for these major costs.

Related: Why Your Employees’ Health Is Your SME’s Wealth

Under the previous structure there was no disincentive not to use your benefits, particularly as they didn’t roll over from year to year like Medical Savings do. It was therefore not uncommon for a call centre to get queries from members asking how much was available in their different benefit areas, so that they could make sure they used them all up.

MSAs solved these sorts of problems by giving medical aid members increased convenience and autonomy, which is why schemes have been using them for the past 20+ years.

The concept of an MSA isn’t far removed from a loan. Like a loan, an MSA lets you use a sum of money when you want to, but you still have to pay for it regardless of whether you use it or not. It forms part of the registered gross contribution to the medical scheme. Take the example of a member who has R12 000 they can access in their MSA each year. Effectively they are paying for this “loan”, contributing R1000 a month, starting in January. However an MSA means they can use all of that R12 000 upfront, such as if they need expensive dental treatment (crowns etc.) at the start of February that costs R12 000.

In this situation, the member has only paid for R1000 worth of that R12 000 “loan” (with their January contribution), so they effectively “owe” the medical scheme R11 000, which they then pay off over the remainder of the year. If the member left the scheme straight after their dental work, the scheme would then contact the member to repay the R11 000, as they still owe that amount.

Related: Is There A Link Between Physical And Financial Wellness?

The concept of giving members access to medical financing led us to develop our new MediVault offering for day-to-day medical expenses. Describing it as a loan holds negative connotations for some, but it’s not that different from the concept of an MSA: in fact, we see the MediVault as a natural evolution. All it means is that you won’t need to pay for day-to-day savings upfront. Instead, you’ll be allocated money for these everyday medical expenses in your personal MediVault and, once you’ve taken the money out, you only have to pay it back over a period of 12 months – completely interest-free. This is a far better option than taking out an expensive loan from a traditional loan company, or getting it from an unscrupulous loan shark.

Our MediVault offering is not at all about loaning funds to people irresponsibly. We’re not creating a monster that’s going to indebt you – we’re just changing the way you can access funds for your healthcare. After all, health is everyone’s most worthwhile investment, and we want to give people the flexibility to make it their top priority.

Continue Reading

Labour Complexity

Year-End Reviews Are Not Always A Positive Experience

This is largely due to parties entering into it without proper preparations, thinking that it can be done in one meeting.

Adri Dörnbrack




Performance reviews are similar to entering a race. It’s all about race day, but what you put in before the event (the discipline to wake up and train, the commitment to push yourself and stick to your training plan) is what makes race day either a great positive journey or a terrible experience. The same principle applies to performance reviews. It should not be a once-a-year meeting. It should be part of the monthly job description for both the manager and employee to be able to compare, adjust and review on an ongoing basis. Then, once a year, all the insights gathered during the year should be reviewed to plan for the next year. 

Performance excellence reviews contribute to the culture of a company

We always say that attitude determines outputs or achievements. Personal attitudes, and the character of the business, is the culture. A great culture will lead to great achievements.

Performance excellence reviews are the tool we use to compare, adjust and shape what we want to achieve and then benchmark to know if it has been achieved. 

Employee performance reveals a lot about the business’ achievements. A business is great when it is profitable, cares about and looks after their people, and contributes towards the wellbeing of society and/or the planet. It is all about performance. What you put in is what you get out. And this is what we need to understand. 

Related: How to Set Up Employee Assessments

Performance excellence reviews can be a positive experience

Know the individual and their needs. There are really no one size fits all generic option.

There are however a few general good practices :

  • Managers should firstly understand the value that performance excellence reviews contribute towards overall achievements.
  • When the manager is positive about the reviews and the value it adds, automatically the employees follow.
  • On a monthly basis, review the employee’s feedback relating to the progress of the functions / tasks.
  • Be understanding as a manager – not all functions might haven been able to be completed due to job changes or the complexity of a growing job function.
  • As employee, understand that a manager is employed to manage the performance of the team, the department and the business. This entails understanding the employees’ performance.
  • New employees need to be reviewed more frequently eg. Bi weekly. When the employee has found their feet, review monthly or bi monthly.
  • Do not review performance once a year only. Review frequently, and once a year have a focused meeting around performance to discuss what was achieved during the last 12 months.
  • Managers should be responsible, and held accountable, to get all staff to complete their reviews (monthly, quarterly etc). It is the managers responsibility and it should be one of their functions.
  • Employees should know that performance reviews are simply there to understand the job, and help to align the job and the person’s talents to get the best outputs. It’s about continuously striving towards efficiency and effectiveness.
  • As a manager: Communicate progress feedback and offer assistance.
  • Be consistent. Review frequently.
  • Celebrate achievements.

Continue Reading



Recent Posts

Follow Us

We respect your privacy. 
* indicates required.