If your company is looking for in-demand skillsets, specialized expertise, and valuable external perspectives while keeping your base of employees focused on their core business, look no further than the independent workforce. But what does it cost to engage independent talent and how can you plan this category spend?
Here are three tips for building a budget to manage your independent workforce.
1. Factor in Total Project Cost
When preparing your budget for independent contractors, you will need to do so within the overall scope of your project cost. Keep in mind that your project rate may contain a variety of costs and resources such as a managed service fee, materials, licenses, or expenses, in addition to the rate of the independent contractor.
Because of all these factors and parameters, it can be difficult to benchmark or categorize the labor costs of a project into a rate card. Independent contractors do not always fit into a compartmentalized service spend, as each project or work stream has unique variables. Those variables are—in many cases—why you are engaging an independent contractor who has specific expertise, ability, or experience in the first place.
While creating a budget is critical, it is equally important not to minimize the intangible value independent talent can bring to your organization.
2. Consider Your Budget
There are millions of independent workers in the United States. This diversity of talent, expertise, and rates that will vary by industry, region, and experience. As such, you may receive a wide range of rates for consultants being considered for the same project.
As part of the engagement process, the independent contractor will typically provide a Statement of Work (SOW) that will identify tangible value points such as certifications, accomplishments, and experience levels that support their proposed project cost. It will typically be up to the enterprise manager to justify the value of the independent professional to make the final decision.
3. Remember the Value You’re Receiving
Ideally, you will want to identify the independent professional who is the best fit for your project, and then have that person justify their rate within their SOW. Independent talent should be able to articulate the value of their services to you. This is a common and preferred process for many clients.
Keep in mind that it is not always possible to compare the rates of independent talent to the cost of hourly or salaried employees. In fact, independent worker rates may be higher than those of a W-2 employee. With employees, you bear the burden of taxes, benefits, and insurances. Independent contractors, on the other hand, are solely responsible for these expenses as well as for their own operational costs. They have to cover their non-billable time at their rate, so expect that a short-term project will be more expensive by the hour than a long-term project. More important than the rate, however, is the value in hiring an independent contractor for the tangible benefits of your business.
If your business plans on regularly engaging independent talent, be sure to have a way of memorializing these project costs as well as the independent professionals themselves. Re-engagement, as well as sharing independent talent across departments, can make a big difference in both quality and time to productivity. Building a curated group of known independent talent can be just as valuable as having a strong staff of regular employees.
To learn more about independent contractor engagement or our proprietary platform, contact us today.