Outsourcing - Using Contractors 

The hiring of external workers on a short term-contractual basis rather than employing someone in an organisation. 

A business can 'hire' external, contracted workers to perform short-term business functions, rather than grant legal status of an internal employees (costly, inflexible, hard to separate).

Businesses require flexibility and agility to survive in the modern economy - the separation processes restrict this agility. 

The quicker firms can move, either in starting new projects or cancelling failing ones, the better their financial performance. 

Contracting enables firms the flexibility to bypass the difficulties (and extensive regulation) of hiring and terminating employees.

Significant risks include: 

• low control over quality, 

• no loyalty to firm (multiple clients). 

Labour hire firms: These firms employ a large pool of workers and then lease these workers to other firms as contractors. They sell you the use of this worker for a higher price that what they pay this worker - this is how they make profit.  

Independent contactors: individual contractor acts as own business (usually as a sole trader with an ABN)