What is an Umbrella Company and How Does it Work?

Contractor Negotiation 101

Leverage the power of an umbrella company to turn freelance hiring into a profit engine.

The complex demands of recruitment, contractor negotiation, and legal compliance can make it challenging for independent businesses to find great talent without exceeding budget. Building a successful contractor workflow requires a thorough knowledge of local, national, and international labor laws. For expert-level management of a contracted workforce, it’s a great business decision to partner with a pro.

Read on to find out how an umbrella company can be an intelligent way for independent businesses to procure an outstanding team while maximizing profits.

How Contractor Negotiation Works

No business is an island. Contractor negotiation is hiring independent workers to support your existing team or perhaps to create it. The process starts with finding and selecting contractors with the right skills and experience for the job. Recruitment is the first and most crucial step of all contractor negotiations—without the right talent, no amount of cost-cutting matters. Ay, rates and contract terms must then be set, which are agreeable to both parties, along with a schedule for work and deliverables. tThemore intangible elements of great contract work involve setting realistic expectations for workload, performance goals, compensation, and building a long-term working relationship.

By understanding contractor negotiation, you can streamline your hiring process and build a team that precisely meets your business needs.

Hiring Headaches, Many Businesses Face

Hiring talent is step one to any successful project. If you can’t locate the right team members, offer an excellent pay and benefits package, onboard workers quickly, and retain them with excellent oversight, your results will be severely impacted. This is a very time-consuming process, requiring subject expertise on market conditions, tax law, local regulations, and so much more. Any one of these issues can stop progress in its tracks.

Some of the most common hiring headaches include:

Limited access to talent pools

Where do I begin my search for contractors? Businesses might come up against roadblocks due to local or national laws, a limited budget to attract the best talent, or a simple inability to know which venues to post opportunities in. Popular online freelancer sites may appear to offer a wealth of talent, but for most businesses, wading through many applicants who may not be qualified is time-consuming and frustrating. With little information to go on, these sites leave many hiring managers settling for sub-par talent or paying more than their business can realistically support over time.

Long and inefficient recruitment

Modern hiring via internal HR departments can drain time and existing staff, with multi-level interview and approval processes.  It’s standard for employers to feel like they are the ones being interviewed, especially when unemployment in critical industries is low and conditions favor job seekers.  With the rise of remote work worldwide, employers must sift through a far larger talent pool and devote more time to video calls, back-and-forth emails, and weeding out inappropriate applicants. When the suitable applicants are located, there is no guarantee that they will accept the job, leading to even more wasted time when job hunters drop out of the process unexpectedly, take another assignment, or ghost an employer they have been interviewing with.

Difficulty in finding the right skillset

Even with the advanced filtering tools of self-service hiring sites, it can still be quite challenging to identify candidates with specific training or certification to perform vital business tasks. The challenge of verifying these skills can be massive.  Not only is it common for hopeful job applicants to pad resumes and put the most flattering spin on their experience possible, but there are also scammers in the mix. Busy business owners or HR departments may not have the time or ability to chase down every claim made in a job application. Still, without targeted recruitment and sophisticated verification systems, employers may not have an accurate picture of the project skills they are acquiring with the hire.  t can feel like taking a shot in the dark, often with enormous consequences for a misstep.

High turnover rates

In a competitive labor market, retaining contract employees can be another challenging aspect of working with freelancers. Any business uses freelance work as a way to audition candidates for longer term positions.  However, contractors who aren’t well-matched and well-negotiated might move on quickly.

These core issues inspire many businesses to seek professional assistance with contractor hiring and negotiations. That’s where an umbrella company comes in—a one-stop-shop that can address recruitment challenges so you don’t have to.

Essential Pay Negotiation Strategies

Do you know what the fair rates are for contractors in your segment? This is a starting point, but employers also must balance compensation that attracts the right talent without overriding project budgets. For this reason, the negotiation process is an important part of profitability.

These basic strategies for pay terms are the baseline for successful contractor hiring:

Doing the research: Market research is the first step in good pay negotiation.  It’s essential to have a deep understanding of what other firms are paying workers for similar jobs, and then an analysis of talent level and availability is needed. Knowing industry pay standards is essential to remaining competitive.

Offering the right incentives: Have you considered the benefits and bonus structures that might attract great talent? Different industries and tasks might structure these in unique ways, such as rewarding good performance, pre-set deliverable benchmarks, or rewards for time commitments. It can be a huge challenge to set incentives for a variety of different workers, tasks, or regions.

Pivoting when necessary: Sometimes, the terms that employers and contractors negotiate are not adequate for changing conditions. Compensation or working terms should not be set in stone. However, businesses may not have the time for complicated back-and-forth with every contractor they wish to hire.

What Does an Umbrella Company Do?

An umbrella company manages every aspect of contractor work for the business that hires them. His might include hiring, compliance, payroll, performance monitoring, and retention programs.  Sometimes referred to as an “employer of record,” the umbrella company can also act as a legal representative for the business, through which all contractor activity must pass.