7 Things to Consider When Hiring an IT Consultant

Are you considering hiring an IT consultant for that challenging project or new piece of equipment? These tips will help you know the questions to ask regarding legal issues and how to avoid common mistakes that companies make when bringing in outside help.

Hiring an IT consultant for a mission-critical task or project that drives core business sometimes is more cost- and time-efficient than hiring a full-time employee that you can train, work with and guide. These specialized IT pros are normally brought in to work on critical, deadline-driven tasks, making it an imperative that you find the right IT consultant for the job. However, it is a tricky-and potentially risky--endeavor, but there are steps you can take to ensure the job gets done while minimizing the legal risks to your company.

Editor's note: This article is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice regarding specific issues.

There a number of reasons you may need an IT consultant including training on a new piece of software, equipment or technology. Maybe you need an unbiased review of internal procedures or SEO. Regardless of the reason, finding the right consultant can mean the difference between success or failure. Add to that the legalities involved and it's easy to see how challenging this task can be.

So where do you start? CIO.com spoke with Michael Chrusch, senior vice president, general counsel & corporate secretary to Signature Consultants, to gain insight into the seven common mistakes to avoid when hiring an IT consultant.

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1. IT Staff Employee or Consultant?

One of the first things you must decide when hiring consultants is what their employment status will be. "Two of the most common legal issues when hiring IT consultants arise in connection with understanding the consultant's employment status and in dealing with the concept of co-employment," says Chrusch.

It's critical for companies to correctly determine whether the IT consultants are employees or independent contractors of the employer. For a regular employee, of course, you need to withhold federal and state taxes, pay Social Security and Medicare contributions, pay unemployment taxes, and so on, but an independent contractor, on the other hand, doesn't require any of that.

"In determining whether the IT consultant providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered," says Chrusch.

If you are using an IT staffing service then they can help you make the determination, but if your HR department makes the call, here are some tips from Chrusch that can help you decide.

Is That an Employee or Consultant?

There are three main categories to consider that provide evidence of the degree of control and independence:

Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?

Financial: Are the business aspects of the worker's job controlled by the payer?

Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.); will the relationship continue, is the work performed a key aspect of the business?

If you decide to go the IT consultant route there are further legal issues that could arise if the nature of the work changes and they are reporting to a person or manager at your company.

"Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. There is no one factor that makes the worker an employee or an independent contractor. The keys are to look at the entire relationship. Consider the degree or extent of the right to direct and control, and document each of the factors used in making the determination," says Chrusch.

If you are using an IT staffing firm, be aware of the co-employment issues that could arise. "Co-employment is generally defined as a commercial relationship between two or more businesses in which each has actual or potential legal rights and obligations as an employer with respect to the same employee or group of employees," says Chrusch. Make sure you address this with the staffing firm before signing any agreements.

2. Protect Your Intellectual Property

Protecting you company's intellectual property (IP) is always paramount. You don't want a consultant who holds your Twitter account hostage or one who leaves and doesn't turn over data or login information. That's why it's important that any company receiving an IT consultant's services address IP up front.

"Companies using IT consultants can protect themselves with standard IP language in which, essentially, the consultant agrees that the ownership of any intellectual property belongs to the "client" -- i.e. the organization that is receiving their services," says Chrusch.

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3. Conduct a Thorough Interview

Since IT consultants are often tied to core business, it's important to conduct an interview, just as you would an employee. Follow up on recommendations and make sure the consultant has experience working with the problems you are having. It's also critical for IT consultants to understand how this project is tied to your business objectives.

4. Know Your IT Consultant's Methodology

Knowing what your consultant does and how he does it can be the difference between success and failure. For example, if you're hiring an SEO consultant, knowing his methodology can save you the headache of explaining to your CEO why your website traffic dropped 50 percent or more in the last month. Knowing your consultant's methodology would have helped determine that he was using black hat techniques that offer high ROI out of the gate but also got you dinged by Google in a search algorithm update.

5. Have a Detailed Contract

Make sure you have covered all possibilities in your contract including costs, hours, milestones, deliverables, deadlines and who pays for outside expenses.

"I strongly suggest a company that uses consultants have their own standard contract in place to give to consultants. If nothing else, a standard contract provides for consistency-- i.e. a company has a better chance of knowing responsibilities of each party and not having to review each agreement to determine answers," says Chrusch.

Having everyone on the same page is vital; make sure you have clearly communicated the scope of the project, what is expected and who the point of contact is in your company and the consulting firm's company.

6. Use Confidentiality Agreements

Your IT consultant has many clients and some of those clients may be your competition. "Confidentiality agreements are important and such provisions should be included within the contract. If 'confidential information' is to be shared between parties before a contract is executed, then I highly suggest executing a non-disclosure agreement [NDA] prior to sharing any confidential information," says Chrusch. Getting a signed letter of confidentiality can help you sleep better at night.

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7. Ensure the IT Consultant Will Train Your Staff

No one wants to have a consulting firm working for them forever. Will the consultant work with you to train your employees once the main project is over? Finding that out ahead of time can give insight into who you are working with.

Choose Carefully

IT consultants can provide you specific expertise, help you get projects completed on time and help your company achieve its business goals. Understanding the challenges of finding the right one is key to hiring a person or company that can add value to your business.

Do you have any tips for hiring an IT consultant? As always we'd love your feedback.

Rich Hein is a senior writer for CIO.com. He covers IT careers. Follow everything from CIO.com on Twitter @CIOonline, on Facebook, and on Google +.

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