How to Manage Contractors Effectively

The uncertainty in the job market, Gen Z’s slow-living trend, and global opportunities have fueled the gig economy. Individuals are seeking greater autonomy and flexibility—something traditional in-house roles don’t offer. 

In fact, 36% of McKinsey’s 2022 American Opportunity Survey respondents identified as independent workers. That’s around 58 million Americans.

Establishing efficient processes for managing independent contractors is more important than ever for in-house managers—or one-person teams, as is likely the case with most small and mid-sized businesses. 

In this blog post, we’ll explore how to manage independent contractors—where you integrate them into your team’s processes while maintaining healthy boundaries.

After all, the OG rule for successful contractor management is to recognize that they’re NOT full-time employees.  

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How to Manage Contractors Effectively: 10 Tips

Managing contractors well benefits everyone. When you set clear expectations and communicate openly, contractors deliver better work and stay engaged. On your end, it means smoother projects and high-quality results. 

Let’s explore how to maximize your contractor relationships for a win-win outcome.

1. Assess and source the right contractors

The first step is to find the right contractors—people who are good at the job specs, do quality work, and match your organization’s work culture and ethos. Unfortunately, this is easier said than done. 

Unlike full-timers, who are happy to sit through numerous interview rounds and test projects, contractors prefer quick interview processes—where you hire them based on previous work (their portfolio).

Here are some tips for interviewing and onboarding independent contractors quickly:

• Plan interviews based on their experience: Adjust your questions based on their experience level. For beginners, emphasize technical skills, while for experts, focus on their work style and approach to projects
• Start with a paid trial project: This allows you to evaluate the contractor’s work quality, communication skills, and cultural fit within your team
• Ask for references from past clients: Reach out to past clients to get firsthand feedback on the contractor’s work quality, reliability, and communication skills

Here are some culture-focused questions from 37 Signals’ founder, Jason Fried. He asks references ‘less-obvious questions’ to evaluate a candidate’s culture fit and work style.  

2. Establish clear contracts and agreements to avoid legal pitfalls

Once you’ve hired the right contractors, the next crucial step is formalizing a successful working relationship with clear and legally binding contracts. These agreements outline the scope of work, payment terms, intellectual property rights, non-disclosures, and other aspects of the partnership.

This can protect your business interests, establish clear expectations, and minimize the risk of misunderstandings or legal disputes.

If you depend on contractors for a large part of your work, you’ll send many contracts. One way to streamline this process is with contract management software and templates. These tools can help you standardize the process, reduce errors, and ensure compliance with legal and regulatory requirements.

ClickUp is project and contract management software—an all-in-one tool for managing independent contractors. The ClickUp Contractor Agreement Template is industry-agnostic, and you can customize it for different projects and locations. 

Download This Template

This contract template covers all key sections, including: 

• Client obligations: Outline your responsibilities, such as providing necessary tools, approval process, and such
• Project scope: Define the specific boundaries of the project, including deliverables, timelines, and expectations 
• Payment terms: Specify the payment schedule, methods, and any late payment penalties
• Confidentiality clause: Protect sensitive information shared between the parties
• Severability conditions: Lay out the terms in the contract, which will be valid even if the contract is deemed invalid during disputes
• Governing law: Mention the legal jurisdiction that will govern the contract in case of disputes

3. Set up a contractor onboarding (and offboarding) process

Just like with full-time employees, ensure you have a workflow to onboard contractors. Also, while you can take some components from your full-time employee onboarding process, these are typically shorter and quicker.

Here’s a 3-step process to onboard contract workers:

• The onboarding document: You create a document to outline the project scope, deadlines, relevant milestones, and how the internal team will support them. You can also use this stage to give them access to any tools and add them to your communication channels
• The meetup: Set up a call with the freelancer and other internal teammates involved in the project. This is a good time to re-iterate your work culture and processes and tell freelancers more about your products and services
• The first milestone: Here’s where you work with the freelancer on the first project—helping them work out initial roadblocks and build momentum

Similarly, ensure a good offboarding process to streamline project handovers and tie up legal loose ends. Here are some things you can include in your offboarding process:

• Check that all final payments are processed accurately and on time
• Plan a smooth handover of unfinished work to ensure continuity
• Get feedback via an exit interview to identify areas for improvement

4. Set your expectations upfront

Most contractors have experienced at least one horror story where a project started as something and ended as something completely different. Don’t be that client. 

To avoid project scope creep and ensure a successful outcome, establish clear goals and milestones with a statement of work document from the beginning. This will help prevent the project from veering off course and ensure you and the contractor are on the same page regarding on the objectives.

Here are two ways to do this:

• Finalize your project’s scope and objectives when drafting the agreement. Get it reviewed by all internal stakeholders to ensure no one comes with a change when the project is midway
• Set up a goal tracker in your project management platform to review the project’s progress at key milestones to ensure you’re on track

Track project milestones with ClickUp Goals

Add your project details and key deliverables to ClickUp Goals. Each overarching goal can be broken down into tasks and sub-tasks, clearly outlining what’s involved in it. This helps you track the completion of each milestone and ensures accountability.

You can use goals to conduct performance reviews and gauge the productivity levels of your contractors.

5. Define your communication channels

Contractors often feel distant from internal team members. After all, they’re not official team members—they don’t have access to IRL or virtual water cooler conversations, which are a huge part of building team connections. 

You need to take the first step and make them feel included. You can do this by clearly outlining your communication preferences, such as channels, meeting frequency, and a primary point of contact.

Here are some tips for defining clear and consistent communication channels:

Choose your communication channel

Select your primary communication platform based on your team’s preferences and the project’s requirements (e.g., email, project management software, instant messaging). Then, go further and include backup channels so you’re always reachable. 

You can also consider offering preferred asynchronous and synchronous tools for better flexibility. For example, suppose you’re reviewing a document or editing a database. In that case, you can use ClickUp Collaboration Detection features like comments, tags, and real-time editing to keep conversations inside the document. 

When reviewing a project’s progress, try having all conversations in one place to avoid information silos. For example, you can create a group in ClickUp Chat and mandate that only updates be made in that channel. This way, everyone is kept in the loop.

Schedule regular check-ins

Plan regular check-in meetings to discuss progress, address any issues, and provide feedback. You can determine the frequency of the check-ins based on the project’s complexity and timeline. 

Share your communications policy

If you have a company-wide communications policy, share it with your freelancers. That way, they know how to talk to you—formal, casual, and such—and if your company prefers async status updates or real-time ones.

You can also share the ClickUp Working With Me [Individual Contributor] Template and ask them to use it as a reference when creating their document. 

6. Create a feedback loop

Regular feedback can help you identify areas for improvement and strengthen the contractor-client relationship. But remember, feedback is a two-way process—you need to set up a workflow that allows you to give contractors feedback and allow them to share their feedback.

Here’s how you can do this:

• Give constructive feedback: Provide specific, actionable feedback that focuses on improving performance rather than criticizing
• Seek feedback: Actively seek feedback from the contractor on your performance as a client or project manager during check-ins
• Use a feedback tool: Consider using a form or survey to gather anonymous feedback from contractors

For example, you can use ClickUp Forms for monthly or quarterly pulse checks with your contractors. The form builder has various field types and conditional questions to help personalize the survey experience. 

You can also organize the responses in a database. The latter can be especially useful for finding patterns in a contractor’s responses over time or examining how all contractors (collectively) view your processes.

This can help you create a collaborative and productive relationship with your contractors. 

7. Standardize your payment policy and process

A standardized payment policy and process can streamline operations, reduce errors, and improve relationships with independent contractors. When you state how this works, you don’t have to follow up with them for invoices, and they don’t have to chase you for payments.

Here are some things to include in your payment policy:

• Payment frequency: Determine the payment schedule (e.g., weekly, bi-weekly, monthly)
• Payment method: Choose a preferred payment method (e.g., direct deposit, check, PayPal)
• Invoice template: Create a standardized invoice template with all the necessary information to share with contractors
• Invoice submission: Mention when contractors are to submit invoices 
• Invoice approval: Implement a clear approval process to ensure accuracy and timely payments

Draft your policy with ClickUp Docs 

Use a tool like ClickUp Docs to outline your payment policies and processes and share them with your internal teams and independent contractors. This will ensure full transparency and give contractors clarity on your payment procedures. 

Even better: ClickUp comes with AI-powered writing tools like ClickUp Brain. You can edit and localize your policy in different languages, which is particularly useful if you hire global contractors. 

8. Foster a long-term relationship

Feedback loops are just one way to ensure a sustainable contractor-client relationship. After all, freelance contracts are built on relationships and mutual respect.

Here are some ways you can show freelancers you respect them and set the groundwork for a healthy, long-term relationship:

• Provide fair compensation: Ensure fair and timely payment, adhering to agreed-upon terms and conditions
• Avoid micromanagement: Give contractors the autonomy they need to complete their tasks effectively
• Be flexible: Accommodate their work style, including flexible hours or meeting scheduling. For example, some contractors don’t follow 9-to-5 work hours, while others might prefer at least a 2-day meeting notice
• Send some swag: Show your appreciation for long-term contractors by sending them personalized swag as a way to recognize their contributions

9. Maintain a contractor database

A contractor database is a centralized repository of information about your freelance team—across departments—so administrative teams like Finance or HR can keep track of contractor details and ensure compliance with labor laws and regulations. 

We recommend using a tool like ClickUp instead of traditional spreadsheet or document tools. It comes with super useful database management features, like filters and tags, to help categorize contractors. 

For example, you can use the ClickUp Table view to create your centralized, no-code contractor database. With advanced sorting, filtering, and Custom Fields, you can easily segment contractors by department, collect specific details, and customize the database layout to your exact needs.

Here are some fields to include in your contractor database:

• Contractor information: Their name, contact details, tax identification number, and payment details 
• Contract specifications: Contract duration, scope of work, payment terms, and links to the contract agreement, NDA, and other legal docs
• Compliance details: Tax and employee classification-related forms, billing records, and other government paperwork 

Optionally, you can add a Notes field in the database to document their specialized skills, contact details, and portfolio links. This is particularly useful when you plan to re-engage an old contractor. 

Plus, ClickUp integrates with most HR and payroll systems. This means you can automate tasks like updating contractor information or marking invoices as paid within ClickUp when processed in your payroll system.  

10. Leverage technology 

Legal compliance is an important aspect of hiring contractors, and it varies depending on the region. In the United States, the IRS has specific criteria for determining whether a worker is an independent contractor or an employee.

You’ll also need to issue Form 1099-NEC to report payments made to independent contractors. A contractor management tool can help you automate and address these complications and ensure compliance with local labor and tax laws. 

Another aspect where tech can help is automating busy work, whether freelance project management or systemic processes like getting contracts signed. One option is automation to approve invoices, initiate check-ins with contractors, and handle other administrative tasks. 

Legal teams can consider centralizing the contract request process and improving efficiency with the ClickUp Contract Management Template. 

Download This Template

Here’s how this works:

1. Submit a form request: Simply fill out the Contract Request Form, specifying the purpose and type of contract, along with the desired deadline
2. Legal review: The legal team reviews the request details, ensuring that all necessary information is provided
3. Drafting and approval: The legal team drafts the contract, incorporating the specified requirements and ensuring compliance with relevant laws and regulations

Even better: the template comes with a Board View that allows the legal team to track the status of individual contracts—ensuring they’re all closed on time. 

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Simplify Contractor Management With ClickUp

As the saying goes, “Success is built on systems.” With ClickUp, you can create a reliable framework for managing contractors—a centralized, organized, and scalable system that can be customized to match the needs of different teams.  

From drafting contracts and managing projects to fostering feedback loops and centralizing contractor information, ClickUp can help you handle all your processes from one place. So, you set a system that works for you on both day 1 and year 10. 

Sign up to ClickUp for free and see how it leads to effective contractor management.