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This month's Tips is the second of a three-part article that outlines best practices for working with consultants and clients. This month focuses on tips for working with consultants directly, and the following month provides tips for being a successful consultant.

Working with Consultants Directly

Some hiring mangers like to work directly with consultants as opposed to going through an agency. There is one major advantage to this route: avoiding the agency's fees. However, you also forgo some of the security the agency provides, as well as their skill in screening and managing the consultant.

It's important to be aware of the level of risk you incur as a business working directly with consultants. These include:

• Liability— most agencies carry not only comprehensive liability for their consultants, but also a policy called "errors and omissions." This protects you against mistakes a consultant might make that impact your business.
  
• Being Left in the Lurch— if something happens in the consultant's life that makes it impossible for them to continue working for you, you have to start from scratch to replace the consultant. Agencies do this for you and some even offer a price break while the new consultant comes up to speed. The same is true if the consultant just doesn't work out.
  
• Dealing with Problems— If problems arise on the project, you're on your own. There's no third party to mediate and manage conflict.
  
• Violating Regulations— The maze of employment law is difficult to navigate. If you're employing the consultant, but not providing benefits comparable to those your full time workers receive, if you're paying monthly instead of biweekly, if you're refusing to pay until you have a time sheet, you could be violating one of many federal and state regulations. Agencies specialize in knowing current employment law and structuring their contracts for compliance.
  
• IRS and State Tax Penalties— If you're working with independent consultants, those who get 1099 forms instead of w2's, you need to be sure that the consultant satisfies the 21 IRS criteria that define consultants. States often have their own conflicting regulations. Failing an audit means that you incur both taxes and penalties. Agencies not only know the law; they bear the penalties instead of you if there are problems.

Still, in some cases it may make sense to work with consultants directly. For example, if you know a consultant personally, if you are comfortable with their abilities and ethics, if they have been personally recommended. In this case, the following guidelines should apply:

• Carefully check references— The key to success here is using individuals you can trust. If you don't know the consultant and their work, carefully check current references. Check with mangers of last two or three projects, as well as at least one peer reference. Ask detailed questions about quality of work, timeliness, independence, ability to work on a team, etc.
  
• Use contracts that satisfy employment and tax law regulations— Make sure you have a contract that is in accord with current federal, state and in some cases local government regulations regarding contract staff.
  
• Have a clear, written understanding of the job— Make sure that, as an attachment to the contract or even a separate statement signed by both parties that summarizes the project, your expectations of the consultant(s), any deliverables, timelines, cost estimates or fixed-price bids, and milestones.
  
• Allow for contingencies— What happens if the consultant can't finish the job? What are their responsibilities in the event that you are not happy with their work? How will you handle changes to project scope? Include these agreements in your contract.

In addition to the above, remember, there's no substitute for regular, effective communication. Good luck!