What is a Contractor Management System: How Does it Work?

Updated 26th of September 2024

What is Contractor Management?

A contractor management system manages and ensures compliance for third-party contractors. It also streamlines processes like onboarding, performance tracking, and regulatory adherence.

If you are an employer in 2023, chances are that you are either already working with freelancers and contractors – or are thinking of doing so soon. But have you perfected your contractor management strategy?

Simply working with contractors is not the same thing as managing them and actually getting it right. If you have ever heard managers complaining about how difficult it is to find good external talent, how often they face communication gaps with remote teams and how stressful end-of-the-month payment cycles are, you know they are doing the former – but not focussing on the latter.

So what is contractor management system and how can a contractor management software help you sidestep these issues in future when insuring contractor compliance?

Contents

1. How does it work? 

2. Key features of contractor management software

3. Checklist for choosing a system

4. Why is contractor management important to your business?

5. Best contractor management systems in 2023

6. The modern employers guide to managing contractors

While it is true that you do not need to train and direct independent contractors and freelancers the way you would your permanent employees, managing contractors is a whole different ball game. Good contractor management helps with every aspect of the engagement. 

So, what is contractor management? Firstly, it ensures that everyone involved is clear about their obligations. For your contractors, this would include the scope of work, their specific responsibilities, their deliverables, timelines and so on. As the employer, your obligations would include making sure the contractor has everything they need to do their job independently, and to pay them the agreed amount on time.

Secondly, good contractor management leaves no room for guesswork. If expectations are not clear until the very end, you might need to get the work redone, causing you to go beyond budget and miss deadlines. Proper contractor management tools and capabilities will let you spot issues early on, and address them in real time.

Finally, contractor management lets you maintain good relationships even after the engagement is complete. So the next time you need a contractor, you know exactly who to reach out to and count on.

How does it work?

For many employers, contractor management is still done the old-fashioned way – manually through spreadsheets. But imagine onboarding a group of contractors and having to manually keep track of what documents they have submitted and individually following up about the ones they haven’t. Or having hundreds of invoices flooding your inbox at the end of every month.

Managing contractors this way gets too effort-intensive and expensive. Human errors are unavoidable too – managers might very easily miss out on updating a spreadsheet, or lose track of a contract or invoice. Cue, the follow-ups and task management confusion!

The more sensible option is to go for the modern solution of just using a great contractor management platform. The best contractor management software automates all the key features and processes, so operations continue to run smoothly while saving you time and money. Such systems keep all the information secure too.

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Key Features of Contractor Management Software

Let us explore the features of a contractor management system in detail to see exactly what it does.

• Supports finding good talent

A good contractor management system helps you discover good talent from around the world. Some contractor management platforms do this through recommendations. Others like TalentDesk, are integrated with the very best freelancer and contractor marketplaces, where you can filter and browse talent.

• Hiring and onboarding process is made easier

The best contractor management software lets you create an onboarding process that works for your organization – and then ensure that every new contractor hired adheres to that process. It enables you to store contracts, NDAs and worker details, and ensures that everybody has submitted the documents they need to. Discover more by reading our full checklist for onboarding contractors.

• Functions as Agent Of Record (AOR) 

When you are hiring contractors from around the globe, it is important to remain compliant to various laws and employment policies. For example, there are different rules for classifying workers in different countries – and these classifications dictate the amount of tax to be paid. Getting this wrong could lead to fines. A good contractor management software might offer Agent Of Record (AOR) services to help you manage contractor compliance.

What are EOR and AOR services? Learn about the key differences and responsibilities.

• Offers project management capabilities

Once you have hired and onboarded your contractors compliantly, it’s time to get them started. A contractor management system gives you an overview of all your projects, keeps track of who is handling what, and lets you manage deadlines. Some solutions also enable you to share information securely. 

• Logistical features such as time tracking & invoicing

Working with contractors involves a lot of operational steps like time tracking, raising worksheets, and more. Without a comprehensive system in place, you end up investing in separate tools for each requirement – thus driving up operational costs. A contractor management system brings all these offerings under one single platform.

• Payment capabilities

  Finally, given that you might be working with global contractors, it’s important to have a portal that allows you to make payments in different currencies. A contractor management system usually integrates with payment portals that enable you to handle currency exchange and make international payments seamlessly. 

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Checklist for choosing a system

Different contractor management software systems will offer different combinations of these features. What you choose ultimately depends on your requirements as an organization. That said, there are certain contractor employee management system capabilities that you should not compromise on:

• Easy to deploy

  Contractor management software systems that are clunky, take days to get up and running, and interrupt your internal processes to the extent where your teams are unable to function, do not make for great solutions. Ideally, the system you choose will be installed and up-to-speed in a matter of hours (if not less!).

• Intuitive and easy to use

  Contractor management systems that require a lot of training to get the hang of are not suitable for most businesses. Since you might be hiring new contractors every week, you will likely end up spending way too much time just training them to navigate the system. The ideal system should be easy to use with little to no training.

• Integrates with your existing systems

  You might already be using certain project management software, time tracking, processing payments and so on. Having to transfer all that data to your new system might prove too tedious. That’s why, it is recommended to go for a cloud based contractor management system that integrates seamlessly with any software that you already use.

• Cost-effective

  One of the top advantages of working with contractors is that it gives you the flexibility to scale up and down as required. That’s why, whatever system you choose should be cost efficient – whether you’re working with ten contract workers or hundreds.

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Why is Contractor Management important to your business? 

If you get all the factors discussed above right, a contractor management system can help you reap incredible benefits for your business. 

Most companies are experiencing massive talent shortages right now, with skill gaps in domains like IT, cloud computing and more. The ability to work well with contractors then becomes a boon because it gives you access to the most skilled professionals from around the world. In stark contrast, companies with more traditional workforce structures are forced to choose from a small pool of local talent. As seen above, contractor management tools help you manage compliance too, so you don’t need to worry about facing any legal or financial repercussions as you work with your global workforce. 

Being able to work effectively with a contract workforce also gives you incredible flexibility. You can take up short- and long-term projects without having to think about hiring permanent employees – or incurring the cost of letting them go once your requirements change.

On a more strategic note, a successful contractor management process frees up time for your managers so they can focus on growing your business rather than having to spend time on operational tasks like documentation, processing invoices, dealing with follow-ups and more. 

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Best contractor management systems in 2023

Now that we have looked at what a great contractor management system should offer, let us explore the best solutions you can choose from in 2023.

• TalentDesk.io

As an end-to-end contractor management system, TalentDesk comes with the capabilities to help you at each stage of your engagement with contractors.

Its integration with its parent company PeoplePerHour (one of the largest contractor marketplaces) gives you access to skilled professionals from around the world. The rich profiles on each contractor gives you a quick view of their experience level, expertise, location, rate and more. You can filter and shortlist the most suitable talent with just a few clicks – and TalentDesk functions as an Agent of Record (AOR) so you can rest assured of compliance as you hire them.

There on, it helps you create projects, assign tasks to individual contractors, track progress, monitor budgets, share information and communicate with all stakeholders – all through a single platform. International payments become easy too – after the project is complete, your contractors can raise worksheets in just a few minutes. The system consolidates all approved worksheets and generates a single invoice for you, which you can pay with just a click. The relevant amounts are then disbursed to each contractor automatically. In short, TalentDesk is designed to help you work effectively with a global contractor workforce.

• Deel

  Deel is a great option for companies that want to hire both full-time and contract talent from all around the globe. It is well-known for its Employer Of Record (EOR) capabilities that enable companies to hire full-time workers compliantly and with ease. It also offers the capabilities to manage and pay global teams across multiple currencies.

• Papaya 

Papaya is an international payroll platform that helps you build, manage and pay a global team. Its comprehensive dashboard enables employers to get a detailed view of projects, employee data, worker status etc. It also empowers your workers by giving them a transparent view of their payslips, track their time, record their PTOs and more.

• Pilot

  Pilot is a payroll and HR tool for US-based businesses to hire and pay their global teams. It makes international payments easy by enabling quick payments directly to contractors’ bank accounts without costly mark-up fees. It also offers a host of HR functionalities like managing local contracts around the world, managing state registrations, offering benefits in 175+ countries and more.

• Remote

  This is another good option for companies looking for global compliance services. Remote offers global entities and expertise to help businesses find, onboard and pay the best contractor talent. From customizable contracts and legal guides to automated payment capabilities, this tool takes the stress out of hiring across countries.

• Lano

Lano is a contractor management suite that helps you onboard global candidates from 150+ countries in 7 days. Their smart contracts and Employer Of Record network guarantees complete compliance to local laws. It also simplifies payments by consolidating payroll capabilities to one platform.

• ADP WorkMarket

  This is a comprehensive tool that brings together onboarding, project management, payment, compliance and reporting capabilities in one convenient mobile app. WorkMarket has features that let you organize your talent into ‘labor clouds’ or groups that are curated and sorted by similar skills, expertise location etc. This makes it easy to track and find talent effectively, on the go.

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The modern employers guide to managing employer

Working with contract workers is a necessity in today’s workplace context – and organizations that do not do this are essentially giving up their competitive edge. However, businesses that actually make the effort to hire contractors without focussing on proper contractor management are probably worse off.

TalentDesk offers an easy way around this. It offers all the key features and capabilities that you will need – and it checks all the boxes in terms of usability, scalability and ease of navigation. So whether you are just starting to explore the advantages of working with off-payroll workers or are familiar with the process and are looking to scale up, TalentDesk can help you meet your needs.