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8 questions to ask of contractor management organisations

Matthew Franceschini
November 26, 2013

Using a specialist outsourced provider such as a contractor management organisation to engage and manage your contracted project workforce can be the most cost-effective, risk free and simple solution. A good contractor management organisation brings a depth of industry knowledge and expertise in areas such as legal, industrial relations, workplace health and safety, insurance and taxation.

In recent years, however, growth in demand for contract labour has led to a commensurate increase in the number of companies offering contractor management services. With so many new companies entering the industry, choosing a suitable contractor management organisation for your business requirements has become much more difficult. How do you choose who to entrust with the responsibility of engaging and managing your contract workforce resources?

It’s not a question to take lightly as the consequences of selecting a poor contractor management organisation can have a serious negative impact on your organisation. A contractor management organisation’s obligation is to provide a compliant framework for an organisation’s contract project workers. However, if it does not conduct itself compliantly, such as not paying contractors correctly or not adhering to statutory obligations, the organisation engaging the contract services could be left with arduous liabilities.

To avoid the risk of forming a bad contractor management organisation relationship, it’s important to ensure that your prospective partner is responsible, compliant, follows best practice and has the interests of clients and contract workers at heart. Following is a series of suggestions to guide you in your search for a contractor management organisation you can trust to meet your needs.

1. Does the contractor management organisation offer contractor management as its core service?
Why buy supermarket bread when there is a bakery right next door? Some recruitment agencies may offer contractor management as a side arm to the business, but few provide a true specialist compliance framework for engagement. Your organisation deserves the best service there is. You deserve a service that is provided by specialists, who have the resources and experience necessary to provide what you need.

Companies looking to engage contract workers are best served when they use recruitment agencies for the ‘pre-engagement’ phase of sourcing and selecting the talent and then seek the advice of specialist contractor management organisations for the ‘engagement and management’ phase to ensure that the workers are correctly and seamlessly administered. Best practice processes, systems and expert knowledge are non-negotiable when it comes to the ongoing management of your contract workforce.

2. Are you happy to associate yourself with this contractor management organisation?
Before you appoint a contractor management organisation make sure theirs is a business you are happy to be associated with. Consider the company’s length of trading, their ownership structure, balance sheet health, ability to fund large-scale payrolls and their statutory compliance. Check their references by talking to other clients and conduct some due diligence on statutory compliance. You need to ensure rock-solid reliability, stability and a match with your requirements.

3. Does the contractor management organisation comply with all current employment law?
With the ever changing legal landscape, being a 100% compliant contractor management organisation is not an easy feat, particularly given the background of uncertainty caused by federal and state government movement in recent months. It takes time and energy to remain up to date with employment law and to understand how it applies to the industry.

A good example of this was the introduction of WorkChoices and Australian Workplace Agreements (AWAs) some years ago, when contractor management organisations needed legal, HR and federal government input to ensure all employer obligations and contractor entitlements were met. The same degree of effort then had to be applied with the introduction of the Fair Work Act, and it is bound to change again in the future.

4. Does the contractor management organisation assess the contractor’s rate and duties and if applicable, ensure they meet the conditions of the relevant award?
Despite being a non-traditional employer, all contractor management organisations are obliged to comply with Modern Awards. Therefore, as part of the engagement process, contractor management organisations should always review all contractor rates in relation to their job function. Any concerns must be discussed with the customer and action taken where required to ensure all conditions are met.

5. Does the contractor management organisation use tax minimisation sales tools that go outside the rulings and suggested practices of the Australian Taxation Office?
To gain a competitive edge, some contractor management organisations entice contractors by projecting likely incomes based on assumed levels of work, business expenses and salary packaging for the year.

Unfortunately, what some contractor management organisations fail to state is that when tax time comes, the contractor will need to substantiate all of their projected expenses and allowances. While the practice may help make the contractor management organisation look more attractive in the eyes of the contractor, it’s not a sustainable practice.

Contractor management requires a long term view, trustworthiness and compliance, whether dealing with contractors or the organisations that engage them. Therefore it is critically important for an organisation and contractors to assess the best outcomes by having visibility and access to the contractor management organisation’s taxation and legal team. This will validate the practices applied and provide both parties with an insight into the makeup of the organisation. These taxation and legal teams should be part of its core capability, not outsourced, so as to ensure continuity and cohesion in service delivery.

6. Are you sure the contractor management organisation collects and remits the appropriate Workers’ Compensation Insurance and Payroll Tax amounts?
Payroll Tax and Workers’ Compensation Insurance are complex areas due to the fact that they are state based tax and each state has its own legislative framework. Where an organisation has contractors working throughout Australia, it must be prepared to constantly review law changes, consult experts and ensure any changes are reflected in organisational process and procedure.

7. Does the contractor management organisation have a comprehensive customer management or support structure in place?
A contractor management organisation must be capable of doing much more than administering payroll for contractors. They must be responsive to customer and contractor queries, provide billing and payroll information promptly and at any time be equipped to deal with enquiries ranging from human resources issues to industrial relations, motor vehicle leasing and superannuation. This means ensuring a variety of subject matter experts are always on hand.

8. And finally, does the contractor management organisation have adequate privacy, security and disaster recovery systems and processes in place?
Privacy and security are of utmost importance in this industry. Every contractor management organisation should have rigorous security policies in place to ensure the safety of personal and client data. To ensure reliability and accessibility, every contractor management organisation should also have a recovery plan that will enable it to resurrect systems and maintain services in the event of a disaster.

With contract workers accounting for an increasing presence in the Australian workforce, organisations need to be clear on their engagement strategies and practices. Sourcing good contractors, establishing consistent and compliant engagement practices, and monitoring the use of contractors in order to better manage budgets are important challenges for any organisation today.

Ultimately, you want to partner with a company that has a solid reputation in their respective market. It is important that your business’ image is not compromised and the service you receive is of the standard you require. Furthermore, your contract workforce should be engaged and managed by a company that shares the beliefs and values of your business. After all, success breeds more success.

Matthew Franceschini
Matthew Franceschini is a co-founder and the CEO of Entity Solutions, a contractor management agency. He has more than 10 years’ experience working in the contract workforce management industry. He holds a Bachelor of Economics and is also the Vice President of Independent Contractors of Australia.
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One thought on “8 questions to ask of contractor management organisations

  1. Hi Matthew,

    Good info……………but a Contract Management Organisations is a new concept for me…………………In our organization…………..our legal team looks after the legal aspects of the contract for any project and Project Manager looks after the commercial aspects of the contract like…..payment schedule; deliverables; mode of payment etc…………..and it is working fine……………………my only question is

    Why I engage any Contract Management Organisations? or can you please share any scenario where Contract Management Organisations is mandatory or showed a better result than the tradition method.


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