Over the last thirty years there have been many changes in the workplace and change is nothing new, we all live with it each day. It is the pace of change I find interesting especially the time it takes from first being adopted to it becoming main stream. Thinking back in the 1980’s almost all the workforce was employed as salaried staff. In the early 1990’s the workforce consisted of salaried staff and contract staff both with its own advantages and disadvantages. One advantage of being a contractor is that contractors have certain expenses that “Tax Man” or (HMRC) Her Majesties Revenue & Customs in the UK consider to be allowable expenses. In short this means that tax is paid after the allowable expenses have been deducted from income. Appose to salaried earnings where tax is deducted first and what is over is your income.

Some contractors was fortunate to secure long term contracts, because the employers at those companies realised that having a contractor do the work could mean that there is a smaller long term liability on their balance sheet. The categories that and employee takes on a balance sheet is different than that a contractor takes resulting in a reduction of expenses on a company’s balance sheet. The “Tax Man” then realised that they were losing money and in 1999 introduced IR35 Tax legislation that is also sometimes referred to by contractors as the 2 year rule. This basically means that if you are on a long term contract you could be liable to pay more tax and the company will have to consider you as salary staff. This is worth taking note of if you are thinking of outsourcing work to a service provider or if you are a contractor taking on outsourced work. Check with your accountant or management company that you work within the correct guidelines and don’t get any “unsuspected surprises”.

Some point that could be useful if you are looking at outsourcing;

1. If you are looking to find freelance consultants or contractors to deliver work for you or if you are a specialist service provider, contractor or consultant interested in doing freelance work visit Elance. Founded in 1998 it is an online community and social network of over 180,000 freelance service providers, contractor or consultant that you can “hire” their freelance expert or outsource your projects to.
2. It is important that you have the right contracts and agreements in please one key agreement to use with any service provider is a (SLA) Service Level Agreement you can find samples of SLA’s on the web so look for some relevant to you sector and industry identify your requirements and set out your own SLA you can find examples on docstoc.
3. Another key agreement is a document that sets out and defines (KPI’s) Key Performance Indicators this is so you can measure the performance set out in your SLA and ensure that you get delivered to you what you expect to have delivered.
4. Being clear on the terms of business or terms and conditions (T&C’s) is also extremely important especially when it comes to payment terms.
5. It is important to remember the laws and rules of the country you trading in and trade with differ. If you enter into any outsource agreement ensure that you agree to the country where litigation will take place if it does as part of your T&C’s.
6. Cash flow is the lifeline to any business so make sure that payment terms are clear and you know what the payment cycles are. Use Invoice factoring if you need to and make sure you know what the rules are in both countries if you are entering into agreements with suppliers in other countries.

I was always told by my dad to “learn the lessons for life’s experiences so you don’t have to keep paying school money by continuing to make the same mistakes”  Some of those “life lessons” invariably are our own but we can also learn from others and I would highly recommend that if you are interested in learning about outsoaring that you read Tim Ferriss book “The 4-Hour Workweek” it is packed with lots of insight and practice advice.

Another extremely useful reassures in the UK is the (FSB) Federation for Small and Self Employed Business one of the main benefits they offer the Small Business Owner in my opinion is the free legal support for members. As a FSB member you can also make use of their factoring service.