Hello! I manage a software engineering group at a government lab. The work we do is very specialized and there are never enough folks with the skills to do the work (despite an active training program). About 7 years ago we took on a very large project and used an engineering services firm to recruit several contract engineers with the requisite skill and experience to increase our cadre of experienced engineers. Our intention was to wean ourselves off the contractors, growing more talent from within. As things turned out, our product was enormously successful, is growing fast and we simply can't let our remaining contractors go (primarily because the 2 that remain are simply fantastic). For a variety of reasons, we will not hire them (and pay the fee to their firm for doing so); however, we just signed another 5 year contract for their services. We have always treated them as equal members of the team and most of our Lab doesn't even realize they are contractors. As contractors, though, their raises and bonuses are built into the contract already - I can't promote them, give them a raise, etc. I can simply release them for non-performance.

So, this long background gives way to the following questions:

1. As I start O3s with my DRs (10 of them), should I include my 2 contractors? Why/why not?
2. Does anybody have experience with this matter and offer some good advice on pitfalls or best practices?

Thanks for the help!

US41's picture

I do 03's with contractors and ask my managers to do o3's with them as well. We also do feedback. We even (gasp!) do coaching. I've spoken with HR about it after a well-respected peer of mine suggested that I might want to tread with caution there. While they have a spaghetti web of rules surrounding contractors, those rules are almost entirely due to industry-wide practices concerning which emanate from a lawsuit against a big software company back in the '90's.

I will recount what I have been able to piece together, but I am not a lawyer, and I cannot advise you legally on your risk or that any of this is entirely accurate or usable. State laws usually outweigh national laws on agency law - and hiring/firing and management practice has to take state law into consideration here in the US. So, tread with caution.

Apparently contractors there were treated as equals in all ways, and then a new and hugely successful version of their software deployed, and only employees were given huge six figure plus bonuses for their work, and the contractors were left making a fraction of the money the employees pulled down for the same work. They sued, they won, and were considered employees due payment on equal terms. The big payouts were made to the contractors, and from then on, big companies started trying to create a legal obstacle to contractors being considered employees.

Some of those actions include:

* Special stripes or colors on access ID badges
* Special rooms or cubes for them to sit in.
* Disallowing them from attending company meetings
* Disallowing them from receiving reimbursement for expenses
* Disallowing them company phones, cars, etc
* Restricting managers from counseling them (requiring managers to call the vendor to give counseling)

Now, in big companies, from what I have observed, most of this is NOT going to create a substantial enough obstacle that a lawyer couldn't rip right through it. Rather, what it really seems to be is legal departments creating make-work by trumping up the lawsuit as a major threat to all industries to justify their existence and HR trumping it up as a way of increasing their power-grip and their own self-justification as well.

In most IT operations, contractors are paid more than employees - sometimes by 50%. Employees receive benefits of some worth, but usually if you total it all up, the contactor's cash is still more. Thus, if such a contractor did sue for equal treatment, they would end up having to pay money back, as they were treated unequally well instead of unequally poorly. Thus, in my not so legal opinion, the actual threat vs. the perceived threat have a huge gap between them, and most of these special behaviors surrounding contractors are mostly based on fear of HR and fear of breaking rules.

I still give feedback (what, I'm going to not speak to my people without a call to HR?), I hold O3's, and I try to coach, although I do it with contractors in a subtle way without being very overt about it. I usually don't force it, and I ask, "What do you need to take away from here for your next job that will serve you well and help your resume?" They name some skill or say they would like to expand their network. I say, "Next week, let's talk about some ideas about how to get started. I use the O3's to go through those steps.

I've spoken about this with my friend in HR. But here's the catch: I built a relationship with that person before I broached the topic. That helped prevent the simple question from turning into an investigation and escalation. I recommend you do the same. Get friendly with someone in HR. Visit them to chat about your own career and ask for advice. Ask them to lunch. Visit their office and compliment something. All of the usual relationship building skills - especially the microcommunication podcast:

In short - listen to them and what they say. You don't have to act on it, but listen.

You'll have to assess your own risk factors and decide what is best for your company, your people, and your own conscience, and find a balance between them.

refbruce's picture

I also manage contractors in a government lab position and have done so working in industry as well. I've found it's helpful to ensure that someone is doing O3's with the contractor, whether it's me or the one of my directs that is most directly leading the work the contractor is doing. The primary adjustment I make is that I do not discuss career development unless the contractor asks for my advice (which some have). I will ask and investigate whether there are skill gaps or opportunities in the current work, and occasionally make recommendations to the contracting agency regarding that individual. I definitely do make an attempt in the O3 to get to know the contractor as a person and I definitely do provide feedback. In some cases, I've found it appropriate to go to an every other week model with some contractors, particularly when they're working part-time on my project and have a very well-define, comparatively isolated piece of the work. But if they're full-time on the project and/or highly integrated with employee work, I think that the communication benefits of an O3 are important piece of project success.

wendii's picture
Admin Role Badge

In the UK this is a point of law which is tested fairly regularly - in fact, in the 7 years I've been around HR departments I've been in two which have been taken to court.

The rights a potential employee could claim are extensive: holiday pay, sickness pay, training opportunities, promotions, healthcare and other benefits, redundancy pay, maternity/paternity pay, unfair dismissal rights, bonuses, overtime, access to mentoring programmes, the ability to join employee clubs and pension rights to name some, and the cost of those, legal defence and any punitive damages the court may demand would add up to well over the difference in pay rates.

The Temporary Agency Workers Directive was proposed in Europe in 2002, and has yet to be agreed and passed to the member companies, but according to PersonnelToday, this will not be forever. When it does become law, agency workers will have the same rights as permanent employees.


tcomeau's picture
Training Badge

For my 11 guys, 6 are employed by my company (I do their performance appraisals, raises, etc) and 5 are employed by a large computer services contractor. The contractor has their own management structure. I give input to their performance reviews and functional goals, but I don't know or control their compensation. I manage the nonlabor budget (travel, training, equipment, licenses, etc) for all 11. They aren't typical contractors in the short-term, use-them-and-get-rid-of-the-sense. A couple have been with the organization a very long time. (~20 years)

I do O3s for all but one of them.

The exception is 100% assigned to one of my other guys who is a project lead. I treat him like a skip, since the lead is his boss in both the functional and the corporate manager sense. (That is, both the project lead and the other engineer work for the services contractor, and that engineer's contractor boss is the project lead.) We're expanding that team, and the new woman we're adding is also employed by the services contractor, and so from my perspective she'll be a skip, too.

There are other oddities in the management relationship, but using the trinity seems to work pretty well.


US41's picture

[quote="wendii"]In the UK this is a point of law

The rights a potential employee could claim are extensive: holiday pay, sickness pay, training opportunities, promotions, healthcare and other benefits, redundancy pay, maternity/paternity pay, unfair dismissal rights, bonuses, overtime, access to mentoring programmes, the ability to join employee clubs and pension rights to name some...[/quote]


Your overall point is well taken, and I will not attempt to dilute it by posting a contrast/comparison between the UK and US work environments. The company viewpoint and the manager's viewpoint on the risk assessment are going to be dramatically different unless the company invests heavily in training on this topic and puts some sort of controls in place to ensure behaviors meet the company's level of risk aversion.

I would be very much interested in your take on this in the UK? Given your expertise, should managers in the UK be concerned about performing O3's with their teams - what about feedback and coaching?

I'm sure some UK managers will read this and wonder if they are going too far doing those activities with contractors.

wendii's picture
Admin Role Badge


Caution - I'm not a lawyer, and I've only been involved on the outskirts.

However, in the company I worked for which was being sued at the time I was there, the rules were:

*No appraisals
*No direction other than work related
*No management reponsibilities
*No christmas parties or other rara sessions
*Feedback went through the agency not direct
*Expenses paid by the agency, not the company

However, even the basic guide to determining status given by the government is massively long and the whole situation is taken into account - therefore you could avoid doing feedback and still be considered an employer:

In terms of the trinity, O3s based on the work, that doesn't stray into the area of development or personal issues, would seem to be fine. Feedback on the way work is done, but not behaviour, would be ok. But coaching should be avoided altogether.

In doing this, you would be avoiding some of the more obvious traps, but not eliminating risk altogether.

If in doubt, consult someone more qualified than me!


Mark's picture
Admin Role Badge

Well said Wendii.

And if your goal is to avoid risk, folks, you'll never be a great manager.

peterlevy's picture
Licensee BadgeTraining Badge

[quote="wendii"]Feedback on the way work is done, but not behaviour, would be ok. But coaching should be avoided altogether.[/quote]

I take it you that by "behaviour" you mean "non-work-related behaviour", since the way work is done is by behaviour.

In the MT context, it is not possible to give feedback while excluding behaviour.

wendii's picture
Admin Role Badge


I think that's why it's difficult! What I meant to say was...if someone was coding for you, you could give feedback on the quality of the coding, or that it was put in the wrong table of the database or whatever, but not that the guy was late all the time or that he was rude. That kind of feedback should go through the agency.

Does that help clarify?