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A bigger slice: Using contractors to carry more of the workload brings profits, potential pitfalls

by Michael Hunter, Atlanta Business Chronicle

According to a 2009 CareerBuilder.com survey of 2,700 employers, 30 percent expected to hire freelancers or contract employees in 2010, up from 28 percent in 2009.

That statistic makes a lot of sense to Melissa Packman, CEO of addONE Marketing Solutions LLC, an Atlanta firm that provides contract workers for the marketing industry.

“We were wondering what the economy would do to our business,” she said, “and 2009 was our best year ever.”

Founded in 1998 by Packman, who had worked in consumer affairs for The Coca-Cola Co., the company initially provided administrative employees, but has grown and expanded its offerings over the past 12 years.

The firm currently keeps 35 to 40 people employed on projects for clients like Coca-Cola, Beazer Homes, CIBA Vision Corp. and Delta Air Lines Inc.

Valuing flexibility

According to Packman, marketing is the perfect industry for contract workers, because of the project nature of the business. It provides benefits both to companies that don’t want to hire a full-time employee and pay the “salary plus 40 percent in benefits,” as well as to the contract workers who value the flexibility of working on short-term projects.

Peter Rosen, president of HR Strategies & Solutions, a human resources consulting firm, agreed that contracting has benefits on both sides.

“For a lot of workers, contracting is a new career path. People who have been laid off, they’re not going to have that job to go back to and are reinventing themselves,” he said. “If you are going to be a contractor, you have to market yourself.” Contractors who don’t want to expend that effort can align themselves with an agency, which will take some of their fees for their trouble, he said.

Owners are getting more sophisticated and wise at using contract workers, Rosen said. “With so many people out of work, they can get better skill sets for less money than bringing someone in full time.”

Some people try contracting as a way to get their foot back in the door to a full-time position.

“There’s a lot of people who want full-time jobs, but will take a contract position,” said Clem Johnson, president and managing partner of a Forest Park franchise of Snelling Staffing Services. Johnson. The economy is “pushing individuals that have been unemployed a long time to work as independent consultants,” he said.

It is a trend he has seen across many industries, having placed employees in health care, manufacturing, distribution, hospitality and the insurance industry.

Packman agreed contracting is “a great way to try somebody out” and has the additional benefit of “no HR nightmare of firing” if a contractor doesn’t work out.

All kinds of workers are trying their hands at contracting.

“Historically, it was women who wanted to keep their toe in the water,” Packman said of the typical addONE contractor, noting the company’s workforce is 80 percent female. Its roster has also included “people who have climbed to the top of the corporate ladder, gotten off and wanted to work on projects” and “people who enjoyed the variety.”

A lot of addONE’s contractors started with the company intending contracting as a stopgap between full-time employment and stayed on, she said.

But the current economy has led employers to be more careful in their hiring practices, even of contract workers.

“Because dollars are so tight, it’s almost like a full-time hire,” Packman said. “They want [contractors] to be of the same quality as a full-time hire.”

Oftentimes, a client will request a contractor that has worked for the company in some capacity before, she said. One company told her, “We really want someone who has our experience on their résumé.”

Legal pitfalls

Companies need to be cautious in rehiring a former employee to perform their same duties as a contractor, however.

According to attorney Brett Bartlett, chair of the labor and employment department for Seyfarth Shaw LLP in Atlanta, the hiring of contract workers is under increasing scrutiny from the state and federal government. “You can’t really flip someone’s status,” he said. “You can’t get around the laws to save money. The laws are there to protect employees.”

Examples of practices that can put a company at high risk are “someone wearing a company uniform, using the company’s equipment and taking directions from a company employee,” he said.

Companies should look for ways they can “disconnect the relationship” between the business and its contractors, he said.

“If you are not putting up the right guards, you run the risk of people being construed as employees,” he said.

The U.S. Department of Labor, as well as New York state, are implementing regulations and laws that will require an employer to notify workers of their employment classification, in an effort to stave off cases of contract workers seeking unemployment benefits.

It is also important for a company to maintain due diligence in hiring a staffing agency. Bartlett said a company can be looked on as a joint employer with a staffing agency and should consider an indemnification clause against any unpaid-wage claims in its contract.

Contract workers are doing more than assisting full-time employees, said addONE’s Packman. “They are carrying the ball, leading the project,” she said. These days, “companies need someone who can hit the ground running,” a quality addONE’s contractors provide. Marketing is a skill that is “transferable across industries,” she said.

The use of contractors for social media is an increasing trend, and in the fall the company plans to add a new division, addONE Digital, to address those needs.

Packman said she is hopeful an upswing in marketing bodes well for the economy as whole. “We are starting to see the budgets come back,” she said. “Companies are saying, ‘We’ve got to promote what we do,’ “ she said. “You don’t want to spend money the wrong way.”

Contractual obligations

Best practices for utilizing contractors:

1. Take time to look closely at whether “contractors” should actually be treated as employees in the eyes of the law.

2. Develop a checklist to ensure that, for any worker you treat or plan to treat as a contractor, you maintain a distinction between an employment relationship and an independent contractor.

3. Disconnect the relationship. Avoid contractors wearing company uniforms, using company equipment, or performing the same duties as company employees.

Posted in: Articles, Employment, Management

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