Onboarding contractors: what HR professionals need to know

Inadequate and non-compliant processes pose significant risks that can impact your organisation long after a worker has gone, warns Claire Beasley

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When it comes to onboarding new contractors, it’s not just about avoiding fines and reputational damage, it’s also ensuring that the onboarding processes are efficient and the contractor experience is a positive one. 

While it is critical to get onboarding right, managing the ongoing compliance of contractors once they are working with you is also important. Establishing effective processes that avoid unnecessary duplication, comply with your legal obligations, save you time and utilise technology can enhance the experience for all.

Contractor status (PAYE workers, umbrella contractors, personal service companies (PSC) contractors and sole traders) dictates what legislation will apply, and any rights and benefits contractors will be entitled to during their engagement. Whether the contractor is supplied by a recruiter or engaged directly, make yourself aware of their status so you can ask the necessary questions, issue the correct documentation and apply relevant legislation.

Contracts should be issued and signed before a contractor’s start date, together with company policies and confidentiality agreements. While it’s advisable to avoid the use of employment terminology in documents pertaining to contractors, if used, an explainer should be included.  

Role descriptions must be provided, or, for a PSC or sole trader, a clear set of deliverables outlined under a statement of work. Creating generic descriptions can be helpful but ensure they accurately reflect what you will be paying your contractor to do.

Working practices must differentiate between contractors and permanent employees.  Inviting contractors to company socials or paying for training courses, etc is not recommended. Imbedding contractor-specific policies at the onboarding stage and distributing clear guidance to hiring managers will help your organisation comply with best practice. 

Compliance requirements vary depending on the role, or industry, but right to work checks must be carried out before contractors’ start date. Government guidance is being continually updated, so while checks can be carried out manually, given the complexity of right to work legislation and the demand for a fast turnaround time to place contractors, it’s worth considering the services of document verification specialists. They provide a simple process for contractors to prove their right to work and provide you with the reassurance this has been carried out quickly and compliantly. 

IR35 compliance is applicable to most companies with an annual turnover of more than £10.2m, and, if applicable, you will need to establish a process for PSCs to carry out and issue a status determination statement using an IR35 tool – either HMRC’s tool, or a third-party tool may be the best option. Taking out IR35 insurance is an option to consider providing protection against a wrongful determination, should HMRC claim that you were not compliant. 

Managing ongoing compliance for visas, business insurance or other items that require periodic compliance checks will require you to implement a mechanism for tracking dates. This is where compliance tools can really support the onboarding process; by using AI to extract and verify key information, ensuring documents are genuine and issuing automatic alerts to you and your contractors to request updated documents upon expiry.

Alignment with UK GDPR requires that personal data be transferred securely; however, during contractor onboarding, data is often exchanged via email, increasing the risk of a data breach. This risk can be mitigated by implementing a compliance tool to host all personal data and contractor documentation, or, at the very least, create a robust policy regarding the processing of contractor data.

Claire Beasley is head of partner solutions at Kingsbridge Contractor Insurance