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HR and management have said things along the lines of "We aren't supposed to treat contractors like they're employees." Why is that the case? What benefit does the business gain by maintaining that division? Alternatively, what detriments are avoided by doing so?

This is usually in reference to things like taking contractors out to lunch with associates, contributing to a baby shower pool if the person is a contractor rather than an associate, etc.

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    What country are you in? – Oded Sep 14 '12 at 18:53
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    Can you provide any more details? In what ways are contractors not treated like employees? And the word "unethical" in your title seems odd. – Keith Thompson Sep 14 '12 at 18:53
  • I have edited the post for clarity. :) – asteri Sep 14 '12 at 18:57
  • I know right! We're all contractors right? Often I get a company ask me if I want to go perm, yet they didn't even sing me happy birthday. I was also in a corporate video once and the MD actually had a scene re-shot without me in it! – thomas-peter May 11 '13 at 8:02
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OK, so there's all sorts of different reasons for hiring contractors... and some of the answers to the social questions are - it depends.

Here's a few examples of why you hire contractors:

  • The company needs "temporary labor" - this fits well with the legal and tax ramifications of contractor employment - they are taxed different and regulated as employees differently partly because they usually start the job with expectation of there being a near-term end date that may even be highly flexible. As such, they are easier to fire, but also it's important that they not end up drawing the conclusion that their jobs are just as secure as a regular employee. A contractor can be given the same tools, office space, and responsibility as a regular employee, but then it has to be very clear that his job is for a finite time (because he helping with a "crunch") and there are usually limits to how long he can be working there before you either have to permanently hire him or let him go.

  • The company likes to try before they buy - let's face it - it's really hard to pick great people, and it's really hard to get rid of people who are permanent employees. Contractors are much easier. So it makes a great deal of sense in some places to take on a contractor, try out their work, and make a permanent offer. It can be well worth any recruiter/contract agency fees for the reduction in lame-employee risk.

  • The company has a specialized need - some new project or initiative requires skills not normally in the company's talent pool. A contractor and/or consultant comes in for a span of time to help with the hard stuff and train employees in the day to day stuff. The idea is that when their skills are either learned by regular employees or no longer needed, they will leave the company.

Sometimes the duration is long term, sometimes it's short term. For example, I worked with a consultant who had worked with the company for years. As legislation has evolved, he's evolved, and he does not work full time with the company, but adjusts his schedule to be there when his client needs him, and he does other gigs at other times. Other contractors I've worked with have been just like a regular employee- but for a short busy season.

The trick is - there IS a separation. In some companies the vibe can be such that you invite EVERYONE out for these very informal occasions, since there is no company money being spent and it's totally voluntary. At other points, management may be particularly concerned about raising the expectation with contractors that they are a permanent part of the team. For example, if you expect that Bullet #2 is the situation, then the manager may not want to raise the expectation with the contractor that he will definitely get that permanent offer - and informal invites can set exactly that expectation.

Also - if the contractor is really there in a consultant capacity, his donation to something like a babyshower can be seen (by an outside observer... like a jury) as a payoff. Yes, in most cases, it ISN'T a pay-off, it's just that the team is passing an envelope, but it can be a very fine line.

Lastly - contractors, by and large, are NOT permanent employees. Do they WANT the invite, especially if the context is that they have to accept or be rude? They aren't building the same long-term bonds that permanent employees may build.

So... backing up to the questions:

Business Gains -

The clear separation hopefully makes it clear to both contractors and employees that the roles are not the same. In a very subtle way, this hopefully makes employees realize that contractors won't be around forever in most cases, so they should be worked with and appreciated when they are there. I frequently tell folks that work with me that if you aren't learning as much as you can from the outside expert while he's around, you aren't doing yourself or the company the most good. So perhaps this gain is "a subtle efficiency improvement".

Detriment Avoidance

Probably the one most bosses, HR reps, and lawyers think of first - law suits (yeah, sigh, this is US-specific). The cost of a lawsuit is huge to everyone - and in fact management can be sued for making a wrong decision here. Especially if they act out of sync with HR and legal guidance. So it can be both a personal/professional disaster as well a big corporate cost in lawyer fees if not benefit payouts. To say nothing of the morale hit if such a thing happens.

There's also a subtle efficiency cost when management and employees forget that contractors are contractors. When anyone in a company ends up making the long-term decisions for that company, without the onus of a reasonable expection of being around to see the outcome of those decisions, then you probably don't have the right decision maker doing the work. If everyone sees the contractor as "one of the guys" and the guy disappears - will everyone suddently look up and realize that he was the guy who made most of the decisions and no one can figure out why those decisions were made? These can often be really expensive mistakes.

The Other Side

Going a bit beyond the question - there is another side to this. Feeling like more than a part of a machine and knowing that you are appreciated for being more than just a set of hands doing a job is key to motivation for most people. So there IS a cost to totally leaving the contractor out of the loop of the day-to-day, low impact social occasions in a thriving team. No one wants to be the guy in the corner and eliminating the contractor from those events can do that. Not to mention that other employees (being nice people) tend to feel not-so-great about leaving out a decent guy from the social stuff - just about everyone has felt like an outcast, and no one really wants to do that (knowingly) to someone else. The impact is not easy to measure, but I'd say an exceedingly rigorous enforcement of separation is likely to have it's own efficiency cost on some level.

The Tightrope

So... most managers walk a tightrope. A good boss and a good contractor can work it out - for example, I've done the following:

  • Sent out team-wide invites to social occasions making it every clear that it was social, not paid time (for anyone!) and that there will be no onus on not going. When it comes from management, it can be a little easier to lay down the law on expectations. I often only have to set the tone once or twice with a new contractor, and then the expectation is self perpetuating

  • Give a contractor charge code for true team building - so long as the team building is about the work at hand, and not longer term strategy planning. Do it consistently - don't play favorite-contractor - it's all or nothing.

  • Do the "contribution requested" type things in such a way that the contractor can anonymously contribute in a way that I don't know about (as the hiring manager) and make it so that ANYONE can sign the card, contribution or not. This often means asking an admin or a socially ept team member to take point person, and doing some minor micromanagement (don't keep a list with how much each person gave!).

  • Spend a lot of time asking myself = "if I had to explain my rationale to 12 random people who don't know me at all... would this make sense and would it be clear that I acted honorably? Is there even a slight chance that I might seem to be sleazy?" I often run the strategy for each case by others in my management team, figuring if they can't see a problem, we're probably good.

Conversely, I've had contractors check in with me. I was lucky to have a fabulous contractor early in my management career who had a great way of phrasing questions - I could tell, simply by how he asked the question, whether he actually wanted to be part of the party, or whether he was asking me because he didn't want to disapoint his employer. Having a contractor who is obviously clear on the fact that social occasions are meant to be easy going and build camraderie is a great boon.

  • I think this is a good answer, not sure why someone -1'ed it? – enderland Sep 15 '12 at 20:52
  • This is a good answer. The thing that is missing here is that there was a judgement against Microsoft for how it used contract staff that ended up costing MS quite a bit. It basically came down to if you treat contractors like employees then they are entitled to severance packages and stock option grants of employees. – IDrinkandIKnowThings Sep 17 '12 at 13:38
  • I would say that you're using several VERY different definitions of 'contractor'. Your first and second are basically referring to contractors as temps. This is normally not the case, as far as I've seen. Most of the time, contractors are people brought in because the company cannot physically/financially do a certain thing. They tend to be extremely skilled individuals, who focus on one facet of a business and bring all that ability to a company. – acolyte Sep 17 '12 at 13:53
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    @acolyte - The "Temp" labor market is huge in programming. Bring in a programmer, work him hard until he burns out then let him go. They are brought in on contract and usually do 1-3 contracts before being either hired on or let go. – IDrinkandIKnowThings Sep 17 '12 at 13:56
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    @Chad - agreed - although treating contractors like sub-humans existed before 1996, too. :) – bethlakshmi Sep 17 '12 at 14:13
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From an HR perspective, there are certain types of company information that may not be disclosed to people who do not work for the company or which may be irrelevant to them (such as information on your new health plan). Further contractors have to account for their hours differently than regular employees at times and the company doesn't want to pay them to attend non-project meetings. This can be why they are not always invited to everything employess are expected to attend or why they don't receive certain emails. There are also times when you need to avoid the appearance of impropriety as well as an actual contracting imporpriety. There may be rules or regulations about the amount of money you can spend on someone who is not a company employee. This is true especially if you are the one who makes contracting decisions. This may be why they do not want you to take them to a company-sponsoired lunch for instance or go out drinking with them.

However, in the course of day-to-day project work, it is generally better to treat them the same way you treat employees. Not allowing them access to the database means they can't solve certain categories of problems no matter how good they are at programming. Not allowing them access to source control (or much more limited access) can cause them to reinvent the wheel when a problem has been solved but they can't see the solution.

Sometimes by limiting access, they have to put the changed code in a new part of the repository and now you have two copies, the orginal and the changed and the next person to work on the code might pull up the orginal not the changed version.

A company that wants to treat contractors differently as far as project work is setting itself up for failure. If you can't trust the contractor, don't hire him or her.

Treating contractors as less than human because they are not employees is certainly a mistake. We are trusting them with our information in order to do their jobs, why would we want to make them feel unvalued and ostracised? Certainly they may not get as nice an office space, but really putting six of them on tables in the boiler room (Conditions I have seen examples of) is not professional or ethical. Some companies act as if it doesn't matter how they treat contractors because they are temporary employees and they don't want permanent employees to "get attached" because they may not be there next week.

Well the best of them we might want to make permanent employees and treating them badly will make them less inclined to work with us. And even the ones we don't plan to hire are still doing what is likely business-critical work. And if you get a reputation in the market place as being a horrible place for a contractor to work in, then the quality of the contractor candidates you have will get lower and lower.

In my opinion treating contrators badly because they are contractors is a good reason to consider if you want to be someplace else. It is an indicator of how they will be treating regular employees eventually.

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    Worst is to be invited to a team event in the middle of the work day, and then be informed that you will not be paid for that time. – kevin cline Sep 14 '12 at 19:36
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The issues are not those of ethics, but those of legality, at least in regards to the following:

  • Employment Law
  • Taxation Law

Employees and Contractors are treated separately under both.

A contractor normally works as a separate legal entity while the corporate employee does not - meaning they must be treated differently.

In regards to the day to day of work (your examples of taking contractors out to lunch with associates and contributing to a baby shower pool), there is no reason for such separation, in particular if the Contractor is paying their way rather than the company paying.

  • And if you give a contractor the same things as an employee the tax authorities may see this as disguised employment and come down on you like a ton of bricks for tax avoidance. – Neuromancer Dec 20 '13 at 18:42
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I've been at places that invited a long-term contractor to the company holiday party. There are other places where they've invited to nothing.

Remember, contractors are usually paid a higher rate in part because there are many benefits they don't get. However, I agree that it is not to anyone's benefit for a company to go out of their way to show a contractor that it is us against them.

If you're having an office birthday party, would it kill anyone to offer the delivery person who just walked in the door a slice of cake? I don't treat guests in my house like family; I treat them better. Nothing wrong with a little hospitality.

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