Outsourcing: Hiring Contract Workers

Today, organizations are beginning to use temporary employees to not only fill in gaps, but in strategic ways that give them the fluidity to meet their fluctuating business needs. Almost every non-profit organization will use outside services at some time. Whether they work, when they work or how much they work depends on your need for them.

WHEN HIRING CONTRACT STAFF IS USEFUL

The need to consider use of a consultant begins as you face serious obstacles or opportunities to meet your organization’s goals. Choosing to outsource should be a need-driven decision.

The following are typical situations when an organization might need a consultant.

• The organization has no expertise in the area of need.
• The time of need is considered short-term, e.g., less than a year, with a general start and stop time.
• The organization's previous attempts to meet their own needs were not successful.
• Organization members continue to disagree about how to meet the need and bring in a consultant to provide expertise or facilitation skills to come to consensus.
• Leaders want an objective perspective, i.e., someone without strong biases about the organization's past and current issues.
• A consultant can do work that no one else wants to do.
• An outside organization demands that a consultant be brought in, e.g., a funder wants to ensure the organization is well suited to spend the funder's money.
• The organization wants a consultant to lend credibility to a decision that's already been made (this situation would be looked at by many experienced consultants as highly unethical).

TYPICAL ASSIGNMENTS FOR OUTSOURCING

Nonprofit organizations are most likely to call on outside help for: accounting, audiovisual productions, audits, computer services, fund-raising, graphic arts, legal, conference management, public relations, publications, research and strategic planning.

PREPARING TO WORK WITH A CONTRACT WORKER

It is vital to prepare employees or volunteers to cooperate before the new contract worker arrives to begin work. They can be curious, resentful and fearful. Steps can be taken to keep the relationship cooperative.

• Discuss the project with employees before it is contracted out
• Appoint a staff member(s) to be responsible for working with the consultant
• Inform appropriate employees, by means of a formal announcement:

the purpose of the project
its importance to the organization
need for employee cooperation

• The consultant can help by being truly professional and dealing only with the assigned project and maintaining a friendly manner.

MAKING OUTSOURCING AS PRODUCTIVE AS POSSIBLE

• Know what you want to do, and make sure your organization is prepared for it.
• Try to reach an internal agreement (board and staff) about the outsourcing.
• Don't become dependent on a consultant.
• If possible, don't limit the consultant to recommending action; get the consultant involved in implementing recommendations.
• Fix causes, not symptoms.

GETTING AND HIRING THE BEST CONSULTANT

• Give interested people the information they need to understand your needs by using a "request for proposal" (RFP) or through direct conversation.
• Get a written proposal from every interested party.
• Get a bid on the fee and reimbursable expenses.
• Look at more than one proposal and examine them all carefully.
• Interview the best prospects and check their references. (Consider their extent of expertise, listening skills, ability to adapt to the nature of your organization, etc.)
• Don't pick someone based only on price.
• Write a good contract or letter of understanding including :
• a list of "deliverables" throughout the course of the project – tangible achievements with fixed dates attached to them
• a project completion date
• a payment schedule
• checkpoints at which you can evaluate programs
• a "bail-out" or termination clause
• name of person in your agency who has the authority to agree to expenditures or approve work This person should know where the project stands at all times.
• agreement on reimbursable expenses
• understanding on who will do the actual consulting

WORKING WITH THE CONSULTANT (ORIENTATION)

1. Help consultants to understand your organization
Provide them copies of your strategic plans, budgets, policies, most recent annual report, organization charts, and advertising/promotions/sales literature. Give them a sense for the overall priorities of your organization, e.g., you might attempt to identify the general life stage of your nonprofit, e.g., start-up, developing/building, stabilizing, declining, etc. The stage will indicate your overall priorities.

2. Include frequent evaluations, including project follow-up
The consulting project should be evaluated regularly, including briefly at the end of each meeting, at mid-point in the planning effort, and at its end. Specify in the contract that certain deliverables (e.g., tangible products, such as reports, presentations, project reviews, etc.) be delivered during the project. Ideally, the project is evaluated at three months and six months after completion of the project, particularly about whether the consultant's recommendations were implemented or not and whether the project's goals were reached or not.

Establish criteria early on from which the overall consulting effort can be evaluated at the mid-point and end of the project. Establish criteria by having you and the consultant specify what constitutes a successful consulting project and process. Get descriptions to be as detailed as possible to later know if the project was clearly a success or not. Don't base evaluations mostly on feelings.

3. Control costs
It is not always possible to precisely price every project. Some projects, such as printing and convention management, are usually fixed-cost projects. Accounting, audits and legal services are usually hourly charges. Public relations can be either hourly or monthly costs.

Insist on timely billings and keep a running tally. If the contractor is off schedule or over budget, face this early. Work out problems when they are most easily corrected. Occasionally, you will have to redirect or even terminate a project.

4. Assist the consultant
Most projects should be a partnership between the nonprofit staff and the contractor. Communication has to be good. How much help do they want and how do they want to communicate?

5. Final reports
A written summary of activities is always useful. You can circulate it to your Board and staff and use it as a reference for your next project.

It is recommended that you review employment definitions and regulations as established by the Canada Revenue Agency and your provincial Employment Standards, and even legal counsel, when developing contracts for contract workers.

WHEN ARE CONTRACT WORKERS ACTUALLY EMPLOYEES?

According to the Human Resource Council of Canada, the first step in determining whether or not a contract worker is an employee is reviewing the definitions of employee, employer and the employer-employee relationship:
Employee - An individual who serves an employer.
Employer - An organization or individual who is required to pay a salary or other remuneration for services rendered by an employee.

Even if under contract, a worker can still be an employee of an organization and it is important to recognize the distinction. A verbal or written agreement in which an employee agrees to work on a full-time or part-time basis for an employer for a specified or indeterminate period of time, in return for salary or wages. The employer has the right to decide where, when, and how the work will be done. In this type of relationship, a contract of services exists.

Indicators of an employer-employee relationship:
The contract is…

• Lengthy or is a renewal with the same individual is hired on several back-to-back contracts;
• To hire a recently laid-off or retired employee of the organization;
• To hire an individual to perform the same or similar work to employees on staff;
• To hire an individual who derives all his or her work income from the one organization;
• With an individual who works regular hours on the employer's premise;
• With an individual who uses equipment (i.e. computer) owned by the organization in order to perform work on behalf of the organization; and
• With an individual who presents himself or herself as a member of the organization (i.e. has organization business cards).

Indicators of a self-employed contract worker:
The contract is with an individual who:

• Has a number of clients;
• Has a GST number;
• Determines his or her own work schedule, works out of his or her own office location
• Acts on his or her own behalf, representing himself or herself as a separate entity from the organization (even when attending external meetings or conducting marketing or promotional activities for the organization); and
• Generates a business loss or profit based on the performance of the work completed for their client organizations.

It is recommended that you review employment definitions and regulations as established by the Canada Revenue Agency and your provincial Employment Standards, and even legal counsel, when developing contracts (setting out the terms and conditions) for contract workers.

If a contract worker is an employee, the organization must: pay the employer premiums and deduct employee contributions for government-sponsored benefits (Canada Pension Plan, Employment Insurance, and Workers Compensation); collect income tax and other taxes; and provide benefits mandated by provincial Employment Standards (refer also to the Employee Benefits policy guideline). The contract worker who is deemed an employee is protected by federal and provincial labour laws and, in a unionized organization, by the collective agreement.

If the Canada Revenue Agency determines that a contract worker is/was in fact an employee, and the organization has been operating as if the contract worker is/was a self-employed service provider, the organization may be required to pay all back taxes, EI and CPP premiums (including the portion normally contributed by the employee) and any interest owed; and may be fined.

Content for Outsourcing/Contract workers was developed by SaskCulture in November 1999,
as part of the SaskCulture Inc. Handbook for Member Organizations.
Updated: May 2014