Businesses find the thought of appointing one of their existing contractors as an intermediary quite attractive. The role of the intermediary is to provide a managed service for the recruitment and running the bill and pay service of other contract workers. What’s often behind this thought is that hiring managers have a good relationship with their existing contractors, and typically have a general dislike for or lack of trust on outside specialist intermediaries.

Providing a managed service may appear trivial and something anyone can do, but it is much more complicated than this.

These are some reasons why using your Contractor may not be the most appropriate option.

Does your intermediary lack expertise?

Some businesses believe that an intermediary is a simple operation thus any contractor can be stood up to deliver it. However, providing a managed service is more complex than you think, and using your contractor may not be the most appropriate option. If the contractor you use doesn’t have the expertise or knowledge in running a managed service, it could have financial implications for your business. The expertise and knowledge required for running an intermediary operation spans legal, regulation, taxation, VAT and use of appropriate bill and pay software (unless your appointed rep will simply outsource everything).

Do they have an understanding of IR35?

The role is much more than to hire / onboard a contractor. They must keep on top of understanding of IR35 and other regulations to ensure the business supports outside IR35 operations. For example, building measures to enable substitutions. Otherwise, you might find the taxman knocking. Will the contractor have the ability to deal with queries about IR35 and your business operations? Will they get caught out with unexpected questions they don’t know how to answer? These are important points to consider. Just like your contractor’s own area of expertise, whether this is project management, technical architecture, and so forth, intermediary work requires an understanding to keep up with a whole new body of knowledge. If they are doing their day job and running an intermediary service on the side, they’d need the right kind of attitude to run a portfolio career of this type.

Will there be less time for projects?

No matter what the opinion may be, it is not easy to run a managed service. Let alone do it right. It takes time to deal with the process and manage relationships. If your contractors are running your managed service, a good chunk of their time will be spent with this. Would it not make more sense to use an external company? This means you won’t have your contractor’s time and focus taken away from their core work. It may feel simple enough that intermediary work only involves setting up contracts, and running a bill and pay service. And like most things, doing this for one person is a trivial operation. However, if they are doing it for more than 10-15 people, it is a serious operation that requires management of a serious process, and this takes a lot of time to do well.

Will your intermediary have enough downtime?

Contractors have their day to day projects to take care of. As a result, they won’t be able to react to the urgent needs you have for staff. With an external managed service, you are utilising an experienced company that are dedicated and focused on recruiting the staff you need. This means your programmes will be able to run efficiently. If you choose to use a contractor, you can guarantee that your programmes will have increased downtime. Usually, the need for resources will come at a busy time for your teams. That’s natural. If you want your resourcing requirements to be dealt with on an urgent basis, it is very likely that the contractor you have just appointed to be the intermediary will also be very stretched at their core job, at that very time.

It may not seem obvious but running a managed service is not as straightforward as you might think. It is time-consuming and there are lots of legalities to take into consideration. If you would like to speak to us about our managed service, you can contact us on Stay in touch with us by following us on LinkedIn and Twitter.