Building Team Culture with External Contractors (Without Getting into Legal Trouble)

The debate over managing contractors vs. internal full-time talent continues. Should you treat your external workforce similar to full-time employees, to foster a fair and motivating team culture? How do you avoid compliance issues and the risk of misclassification? And, of course, how do you make sure to take into account different motivations for delivering great work?

It’s easy to assume that all team members should be treated and managed similarly. However, full-time employees and contractors have different motivations, expectations, and backgrounds. Not to mention, they have different implications when it comes to compliance.

For example, asking everyone on a project to work over a weekend can lead to resentment. In this case, a contractor might be paid by the hour and incentivized to work more, but full-time employees are salaried. People are human regardless of expectations so it’s important to be empathetic to both roles.

Key Takeaways

• Full-time employees and contractors have different motivations, compensation structures, and legal protections, so treating them identically can backfire even when the goal is fairness.
• Misclassification risk is real and expensive: FedEx paid $240 million to settle driver misclassification claims across 20 states, largely because drivers were required to use company-branded equipment and follow employee-like directions.
• Healthy team culture correlates with real business outcomes — companies reporting a healthy culture are 1.5 times more likely to report revenue growth above 15% over three years, according to Grant Thornton and Oxford Economics.
• Building culture with contractors comes down to a few habits: clear communication, space for feedback, respecting their autonomy, and paying them on time.

What Is a Contractor Team?

A contractor team is a group of independent contractors, often working alongside full-time employees, brought together to deliver a specific project or ongoing body of work. Each contractor brings their own expertise, tools, and schedule, while the company sets the goals, scope, and deadlines.

That mix is what makes culture tricky, though. Employees and contractors sit on the same project, but they're paid differently, protected differently, and managed under different legal rules. A strong contractor team feels unified in how it communicates and collaborates, without erasing the independence that keeps each contractor correctly classified.

That's easier said than done.

Worksuite manages contractor teams in one platform, from classification and onboarding to contracts and payment, so managers can focus on the working relationship instead of the paperwork.

Why Engage External Talent

Research also indicates that contract work is often viewed as lower status, and even working with independent contractors can negatively impact employee job satisfaction and sense of belonging within the organization. It’s important to educate your staff that hiring external workers does not necessarily hurt internal jobs. There are many reasons why an organization might need to bring on independent contractors vs. full-time employees (FTEs):

     
• Scaling out quickly
         
• Testing an initiative on a project basis, before bringing the job in-house
         
• Needing a seasoned expert to solve a specific problem
         
• Timeline (engaging someone right away, vs. hiring, onboarding and training for 2-3 months)
         
• The best talent for the job happens to be located in another country, and they’d prefer to maintain independent contractor status
         
• Costs (for example when hiring in the U.S., an employee typically costs the company twice his/her salary, when you add in benefits)
   

Managing external contractors and full-time staff in the same way can sometimes magnify the differences and cause internal problems. Your company must balance avoiding IRS misclassification with building a team culture for all talent to produce great work and grow as leaders.

Legal issues aside (we cover misclassification in another article), let’s talk about how to create a unified team culture, across both your internal and external talent network – while avoiding compliance risk.

How to Build Team Culture (Working Together in Sync)

While it’s the job of HR or Legal to stay on top of worker classification and related legal matters, as a manager, it’s your responsibility to encourage productivity within your team. When your team is mixed — long-term contractors and full-time employees — it’s essential to consider how to engage them and build team culture with empathy. 

However, this is a cautious balance. In one case, FedEx misclassified their contractors as employees and was ordered to pay drivers in 20 states $240 million to settle. The FedEx contractors were required to work on-site, use company-branded equipment, and perform the same functions as employees. This is just one of many misclassification lawsuits in the last few years across industries.

A company brings on contractors to help fill knowledge gaps in projects, or to scale up quickly without requiring onboarding ramp-up. While independent contractors have autonomy over their work, making them feel like they belong is important. To retain great talent and foster long-term relationships, it’s critical to realize your external workforce are more than just “hired guns.”

Onboarding an External Remote Workforce

Creating a strong remote team culture starts with careful onboarding planning focusing on culture and team collaboration. A 2019 study found that businesses that report healthy team culture are 1.5 times more likely to report average revenue growth of more than 15% over three years. 

When it comes to freelancer management, the correct classification and onboarding will start the collaboration on the right foot and set your team up for success. When the contractor starts a project, be clear about everyone’s role. Open and transparent communication can minimize misunderstandings and encourage teamwork including:

     
• Introduce the contractor to stakeholders
         
• Be clear about their role within the project and decision-making hierarchy
         
• Share project expectations, scope, and timeline
   

Remote Team Culture for External Team Members

Building a healthy team culture is possible without facing misclassification. Here are three habits you can push for in your mixed teams:

Communication Is Key.

Effective communication is crucial to project success. Granting contractors similar access levels to supervisors and decision-makers streamlines processes and enhances productivity. Contractors need to be able to seek clarification from key stakeholders, similar to an employee’s capability to do so. 

Belonging in this sense includes clear creative briefs, setting expectations and scope early, clarification when requested, and consistency around vision and milestones. Even guideline inconsistencies can cause significant issues, as different project managers want different things. 

Respecting the contractor’s knowledge and time will help them feel “part of the team” and that their work matters. 

Create Space for Feedback.

Feedback is more valuable and honest when informal and part of an ongoing dialogue. However, employees have more opportunities to openly contribute to company culture, through team meetings, company gatherings, and one-on-ones with managers and direct reports, than contractors.  

Create an intentional space for contractors to give and receive feedback during kick-off and post-mortem meetings. It will allow them to speak up, contribute to improving processes, and bond with full-time workers in the long term. 

Autonomy Over Their Work.

You hired a contractor for their expertise and it’s important to trust them to do their work. Add contractors to Slack for real-time communications if they need to reach out to stakeholders, but be careful not to require them to “be online” as autonomy is part of their role. 

Give contractors the chance to involve themselves in project conversations and use their expertise to build strategy. By giving this space and building a team culture of collaboration and flexibility, long-term contractors are more productive and feel like the team appreciates them. 

At Worksuite, we value flexibility for our full-time employees and contractors. We give our employees the freedom they need to do their best work. Our team members have the authority and autonomy to work wherever and however they need to, so they can deliver exceptional results

Timely Compensation.

While it may seem obvious, paying contractors on time makes all the difference. A 2022 study found that nearly half of invoices from businesses in the U.S. go on to become overdue.

While employees have a steady paycheck every two weeks, contractors on the other hand live in a state of flux and a client that respects their time and effort with a timely paid invoice will get better work. 

Core Principles to Keep Talent Engaged

At Worksuite, we value fairness and recognition for exceptional work as core principles. Our team distributes rewards equitably and celebrates success with partners and customers.

Worksuite’s team comprises individuals from over 15 countries, including employees and long-term contractors. Team leaders foster a shared culture and ensure fairness, while possessing compliance expertise to ensure proper documentation, benefits and opportunities for ownership.

Great things happen when teams collaborate and trust each other long-term. Seek feedback and revise external workforce processes to improve team culture and productivity. Just because they’re not integrated full-time into your company, it doesn’t mean you can’t foster a fair and motivating team culture regardless of their worker classification.