Hiring Independent Contractors: How to Attract, Engage and Retain This Top Talent

What is an independent contractor?

Independent contractors, also referred to as freelancers, 1099s or gig-workers, are playing an increasingly important role in business' overall talent strategy. These highly skilled workers often possess a specialized skillset, such as in translation, healthcare, or IT. Organizations rely on independent contractors to fill gaps in their W2 workforce or sometimes as the main labor force, depending on their business model. In contrast to W2 employees, a contractor is typically hired for a specific project over a defined period, does not receive benefits such as health care, and pays their own taxes.

Advantages to hiring independent contractors

Hiring independent Contractors can bring several important benefits, and companies are steadily adding these workers to their overall talent bench. Recent data from WorkMarket's joint study with Worldwide Business Research (WBR) shows that 86% of companies surveyed plan to increase hiring and utilization of contractors within the next year. Among the top reasons for this trend include access to highly specialized skillsets provided by these workers and the flexibility to scale up or down quickly based on current needs.

Growth in the contractor workforce

Alongside this growing business demand for independent contractors, workers today are often more interested in pursuing this type of work as well. The growth in the contractor workforce is forecasted to increase by 33% from 60M in 2023 to 80M in 2027. * This growth is largely due to Gen Z and Millennials, who state that they are most likely to consider freelance work in the future (73% and 70%, respectively).

Key factors attracting workers into the contractor workforce:

Highly specialized/high-demand skills draw a higher earning potential
Ability to choose when, where and how they want to work
Better work/life balance
Pursuing a variety of projects based on interest

Steps to effectively engage and retain workers

In today's competitive environment, contractors are potentially accepting assignments from several companies at the same time, and your business should be their top choice. There are several options you can use to keep your most qualified workers happy and returning for more work.

1. Offer fast and flexible options for paying independent contractors

Ensuring your workers are paid efficiently and on time helps build a strong relationship and trust with your organization. Keep in mind that contractors may have their own operational expenses - much like your business – and paying them quickly shows respect for their work as well as their business needs. This means approving invoices in a timely manner, paying according to expected terms (Net 15, Net 30) and using an automated payment process.

In addition to paying quickly, another important consideration in worker satisfaction is flexible payment options. Manual payment, such as via check, is not only slow and prone to error but also places a higher administrative burden on your team. Direct deposit, pay card and digital payment systems (such as PayPal or HyperWallet) all offer safe, secure and efficient payment. Remember, when it comes to payment, speed and flexibility are key to keeping your workers happy.

2. Simplify your contractor onboarding process

A streamlined and efficient onboarding process is crucial to retaining contractors. Don't make the mistake of creating an overly inefficient and burdensome process, which may frustrate workers and your own team.

Since most contractors are virtual, it is essential to have a digital onboarding process where workers can easily self-onboard. Clearly set requirements, including a checklist, so workers know what they need to provide to complete onboarding. Allow workers to upload their documents, such as tax IDs, certifications, licenses and background checks into one central repository. Consider leveraging technology that can help automate the onboarding process for contractors.

3. Use an Independent Contractor Agreement to set expectations

Clearly setting expectations for the relationship and each assignment is important not only for successful performance from your contractors but also for laying the foundation for a lasting relationship. One of the best ways to communicate goals and expectations to your contractors is to use an independent contractor agreement during the onboarding process. This agreement lays out all the terms and conditions of the work and what is expected. It should include, at a minimum, the scope of work to be performed and deliverables, the length of engagement, payment terms and schedule, and any other requirements relevant to the assignment.

4. Provide a steady flow of work assignments

Workers who receive a steady flow of projects from your business will be more likely to view your company as a priority. Not only does this offer independent contractors a source of financial stability, but your business will be more likely to benefit from higher quality work and loyalty from these workers.

To help ensure your best workers are receiving preference when filling assignments, you'll need a system in place to help identify and organize workers with the appropriate skill sets and route assignments to them as a priority. For example, WorkMarket offers you the ability to group your talent into labor clouds based on performance ratings, certifications, licenses and skill assessments to easily match assignments to the best workers. Then, you can use automated workflows to route assignments to these workers either individually or as a group based on performance ratings, certifications, licenses and skill assessments to easily match assignments to the best workers.

5. Have referrals available for independent contractors that need benefits

Benefits like health insurance are traditionally only available to W2 employees, and independent contractors may need support securing access to their own health insurance benefits. Organizations that have referrals to third-party benefit providers can set you apart from the competition when it comes to retaining your best talent. For example, you can partner with third parties who provide insurance plans for self-employed individuals and provide contractors with referrals to these plans. While contractors would still need to enroll and pay for their own health insurance coverage, making it easier for them to find and obtain insurance coverage can go a long way toward showing them that you care and that they're protected.

In addition to health benefits, offering access to General Liability and Occupational Accident Insurance (GL and OAI) helps protect not just your contractors, but your business. GL will help protect your business from claims of bodily injury and third-party property damage while performing on-site work. Since Workers' Compensation is generally not available to independent contractors, offering OAI will provide coverage for lost profits, medical expenses, and a death benefit in the case of injury or damage while "on the job."

How technology can help simplify hiring independent contractors

In today's quickly evolving landscape, the competition for talent is fierce. Technology can help you engage and retain your most qualified contractors by onboarding and paying them quickly and efficiently. Utilizing an Independent Contractor Management System—like WorkMarket by ADP^® —provides an easy self-onboarding experience for workers with automated verification of U.S.worker Tax IDs and bank accounts. In addition, the platform supports automated payment workflows so you can quickly pay workers based on preset payment terms and with their preferred payment method.

To learn more about how WorkMarket can help you better manage your independent contractors.