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Small companies can better manage peak workloads by hiring independent contractors.

James Fries, a partner at human resources consultant Cenera in Calgary, doesn't have any executive coaches on staff, even though his company offers executive coaching.

"We have about a dozen coaches who work with us," he says. "But I wouldn't want to hire just one of them to do all of our work."

Instead, Mr. Fries brings a selection of executive coaches on board as independent contractors. They don't work in his office and they are not on the staff payroll.

"They all have different backgrounds and personalities and experience," he explains. "I let our clients meet with three and then choose, and this way I'm able to do a better job of lining up expertise with the needs of the client."

Hiring independent contractors can be an attractive option that makes financial sense for any company, but especially for small businesses, he says. The range of jobs that can be outsourced to independent contractors goes from positions related to one-off projects to long-term functions within the business, such as payroll or IT.

The primary advantage of going this route, rather than hiring a full-time staff person, is that it allows companies to manage peak workloads, Mr. Fries says.

"When workload demands go up and down, this makes sense," he says. If there isn't a baseline amount of steady work, businesses risk hiring only to end up in a "make-work" situation, which is unproductive for both managers and the hire.

Barbara Jaworski CEO of Toronto's Workplace Institute, an organization that provides talent tools for employers, suggests that an equally compelling advantage is the access independent contractors can give small businesses to specialized knowledge at a more manageable cost. "It can work very well because you get a lot of skill related to a particular topic," she says.

Also enticing, of course, is the lack of costs such as taxes and benefits when hiring independent contractors. And having workers who don't occupy space in the office can be ideal in situations where space is tight, Ms. Jaworski adds.

But hiring an independent contractor does not entirely take the associated work off the employer's plate. For such arrangements to be successful employers need to hold up their end of the relationship, Ms. Jaworski and Mr. Fries agree.

The first step in managing the relationship properly is hiring the right contractor, and that often means going through the same steps an employer would to find a suitable full-time employee. Considering there were 2.7-million self-employed Canadians in 2010, chances are there could be several suitable candidates for the task at hand.

"You need to be just as careful as you would with hiring staff," Mr. Fries says. (There may be situations, though, where the scope and nature of work are simple enough that employers can be less rigorous with hiring a contractor, he adds, because potential risks are low.) If you've hired well, wondering whether your contractor, who likely is working remotely, is being productive shouldn't be an issue, nor should their ability to maintain confidentiality. "Some of our competitors are putting restrictions on consultants, saying they can't work for the competition," Mr. Fries says. "We don't do that because we wouldn't hire them in the first place if we didn't trust them."

Once a contractor is on board, communication is critical, and this is especially true if they often don't physically work in the employer's office. From Day 1, "you need to clearly set the parameters of the work," Mr. Fries says. "And be very clear about things like quality standards and the number of hours." This means documenting the scope of work and the deliverables and also setting regular deadlines and check-in points at the outset.

Mr. Fries is a fan of having the independent contractor come into the office at regular intervals, but particularly when work commences. Welcoming them to the team is key to gaining buy-in into the project or role they've been hired for. "There's value in putting a face to a name," he says, adding that he supports including contractors in social gatherings as well.

Developing a relationship with the contractor could also help to dissuade them from leaving you to work for others – namely the competition. "If you don't pay attention to the relationship, you lose loyalty," he says.

But it's a two-way street: Maintaining close communication with a contractor should also work to serve their interests. "If they depend on a certain level of work, you have to be really careful on how you manage those changes if there's not as much work," Mr. Fries says. "You should be talking about it early." This is true not only if you anticipate work to decline, but also if you expect it to increase.

While contractors can prove invaluable for specific short-term projects, they also can be hired to perform ongoing jobs for indefinite periods. But Ms. Jaworski warns of blurring the boundaries between someone you consider a contractor and someone Revenue Canada considers a staff person. "If they're doing only work for you, then do they cross the line into becoming your employee?" she asks.

Certain criteria – such as whether or not the contractor has other clients, ownership of job equipment and control over when and how the work happens – dictate whether Revenue Canada considers a contractor to actually be an employee. Employers need to consider these rules in advance, Ms. Jaworski says, or they could be on the hook to pay up.

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