Contract employment offers a variety of benefits for both employers and independent contractors. To receive the full benefits of hiring contract labor, businesses must study the guidelines for the definition of a contract worker set forth by the Internal Revenue Service to avoid paying extra taxes and other fines. If a company claims a worker as an independent contractor for tax purposes, but that worker does not meet the IRS definition of a contract worker, owners could find themselves subject to heavy penalties.
The hiring process, training and benefits associated with hiring full time employees can cost well into the thousands of dollars. Many small businesses do not have the resources to go through this process when in need of workers for a critical but finite project. Hiring contract labor also saves money in the form of payroll taxes, as the independent contractor is responsible for paying his own payroll taxes to the IRS.
Specialized or Seasonal Help
Companies needing a specialized skill set for a finite or indefinite project may not wish to take the time to train new or current employees. They can hire contract laborers already experienced in the necessary competencies. These independent contractors can get the project off and running, supervise permanent employees who possess only the minimal skills necessary, set up project plans and fulfill all project needs in an expedited manner.
Some companies need extra workers on a seasonal basis only, such as a store specializing in Christmas decorations or a tax preparation office. These businesses can hire contract labor for the duration of the event and separate easily afterwards. This keeps the business from having to keep up with additional payroll responsibilities during off-seasons.
One of the main benefits, next to cost savings, for hiring contract labor involves the ease of separation. If an independent contractor does not fit in well with the company culture or is not performing to the satisfaction of the employer, the hiring manager can terminate the relationship with little or no paperwork. Terminating a full-time, permanent employee involves cessation of benefits and sometimes an exit interview or other human resources requirements.
Lower Exposure to Legal Action
Permanent employees, whether full- or part-time, have numerous rights and protections under federal and state laws. Many of these laws do not apply to independent contractors. For example, contract laborers do not have the right to overtime pay, form a labor union, take time off for a sick family member or to spend time with a new baby.
Benefits to Contractors
Independent contractors make their own hours, decide when to work and who to work for. They do not depend on the success of a single business to produce income and meet their financial responsibilities. According to the Wall Street Journal, independent contractors earn up to 40 percent more per hour than permanent employees. Contractors do not receive benefits from clients; the higher pay is meant to make up for this. Rather than having taxes taken out each pay period, independent contractors pay quarterly taxes, allowing them to hold onto their cash longer.
Recruitment process outsourcing is still new for a lot of companies. Some may not realize that there are options in how to outsource or to improve their recruiting process, while others may stick with other solutions because that’s the way it’s always done and that’s the way the boss likes to do things. However, if you’re serious about RPO and really want to know what it could do for your organization, then here are the six awesome benefits of RPO.
- Reduced Recruiting Costs.
This is one of the top reasons why organizations choose an RPO solution, and it’s also one of the biggest benefits of RPO. Many companies spend a lot of money on headhunters and job boards, or waste a lot of money through high turnover rates. With other companies, time is simply wasted in lengthy hiring processes or outdated (or a lack of) technology. An RPO provider can reduce recruiting costs by streamlining your recruiting process and showing you how to find good candidates better and with less time and money.
- Scalable Recruiting Capacity.
Christmas season is here, and many employers during this time go through a hiring spree for seasonal employees. If that’s you, then an awesome benefit of RPO is having a recruiting process in place that can scale up for the Christmas season, and then scale back down at the beginning of the next year. RPO is also great for companies that are growing rapidly, that may need extra help in scaling their recruiting capacity to meet growth.
- A Consistent and Predictable Recruit-to-Hire Process.
Candidates don’t like it if they don’t know where they stand in the recruiting process, or if they don’t know what’s happening or what’s supposed to happen next. This problem could also plague companies who have multiple entities or multiple departments, where each one could have their own hiring process. RPO can help get everything together and make the recruit-to-hire process consistent and predictable for both parties and across the entire organization. This makes it easier to know what’s going on and what everyone is doing to when recruiting or hiring someone.
- Increased Candidate Quality.
Hiring managers know that a great candidate is much more than a combination of experience and education, but also includes personality and previous accomplishments. Hiring managers who are pressed for time to fill a position, or have a ton of candidates to go through, may not necessarily take a look at the qualities that determine whether or not the new hire will stick with the position. An RPO solution can get into those qualities while still looking for candidates who have the needed experience and education.
- Increased Hiring Manager Satisfaction .
The increased hiring manager satisfaction comes from many aspects of RPO. Hiring managers now have better away to assess the success of their efforts. Hiring managers now have more support from executives in the recruiting process. Hiring managers now aren’t stretched so thin and are better able to do their jobs. With the help and partnership of an RPO provider, hiring managers will be more satisfied with what’s accomplished and how candidates are recruited and brought into the company.
- Enhanced Employment Brand.
The employment brand is essentially the identity of the company as an employer, and when every other aspect of the recruiting process is in place and doing well, the employment brand improves. If your candidate quality improves, that only looks good to other potential candidates for your organization. If your hiring managers are satisfied and are working in a consistent recruit-to-hire process, then people who go through that process will only have good things to say about it and your company as an employer. Overall, RPO helps the company in many more ways that just cutting recruiting costs or filling positions faster. RPO can actually help a business become a better place to work.