July 22, 2020

Contractor pre-qualification – self-managed vs outsourced verification

If you are juggling multiple spreadsheets and systems that aren’t integrated to review and manage key contractor pre-qualification documentation, then you’re in the right place.

In this blog, we’ll cover what you need to know to find a contractor management solution that best fits your organisational needs to manage the verification of documentation for pre-qualification.

What is verification?

Verification is the process of verifying information and details contained within a document and confirm that the document belongs to the individual or company, and importantly that it is has not expired.

There are two levels of verification:

  • Checking documents are true, accurate and verifying them with third party systems e.g. licence provider, or
  • Checking documentation aligns to the individual/business, is up to date and accurate as recorded in the contractor management platform.

With the right tools you can verify your contractors efficiently to ensure the validity of their key documentation, be that insurances, licences and qualifications.

The overarching importance here is that your processes ensure compliance.

What type of documentation needs verifying?

Verification can apply to any document. Companies need to evaluate what documents they need, and how to verify them. When you manage document verification internally, the volume and range of documents can make verification complicated and it requires an understanding of what determines a verified document. For this to be successful, existing expertise is required to be able to carry this out effectively.

These are typical types of documents that are recorded and verified at organisational level:

  • Insurances
  • WHS compliance and policies
  • Environmental and sustainability compliance
  • ISO certification
  • Motor vehicle, plant and chemical registers
  • Safe work method statements
  • Risk assessments

Here is what to commonly expect at worker documentation level:

  • High risk work licences
  • Proof of identification
  • Right to work
  • Qualifications and training records
  • Medical assessments
  • Working with children checks
  • Police checks

How is verification managed? What are the options?

All hiring companies require that contractors must submit their documentation for pre-qualification prior to being deemed ready for employment. This information is to be uploaded and stored in a contractor management system so that when employing a contractor, the companies or individual’s records can be easily accessed for validation to determine if they are qualified, insured, and suitable for the project at hand. A contractor management system (CMS) is also invaluable for when an audit occurs, as it allows key documents to be centrally stored on your full external workforce.

The use of contractors has steadily been on the rise with gig economy now making up almost half of the global workforce. The effort to deliver high quality verification of contractor documents brings a significant need for administrative support as the complexity in the onboarding process has evolved and the types of documents required has expanded.

When pre-qualifying contractors, organisations have a choice to either manage document verification internally or outsource this to a dedicated specialist. Whether you self-manage or outsource this activity, the decision will largely depend on the resources available, the variety and complexity of documentation and the volume of contractors that your organisation employs. Here we look at the positives and negatives of each approach

Outsourcing verification:

Pros Cons
The outsourcing company has developed capability and dedicated resourcing to verify at scale and reduce the overall cost of verification. Verification service costs are typically passed on to the contractor to pay.
Contain expertise to breakdown the complexity of which documentation need verification, and what defines a verified document. Quality control is hard to monitor. The outsourcing partner should provide a seamless solution however your company processes and terminology are not always fully understood like that of an employee.
Removing the administation efforts of verification from key internal staff allows them to focus their time on the safety of your projects and people. Outsourced verification brings efficiencies primarily companies with large contractor numbers.
Expect quicker turnaround times as the service is dedicated to the role of reviewing and approving key worker documentation. Making sure workforce is ready to be employed when you need them. Employees will lack an understanding of contractors and their information and may lead to the wrong contractor being employed.

In-house verification

Pros Cons
You have control of the process with someone that is dedicated to managing verification inline with your business requirements. A contingency plan is needed when the internal resource is on annual leave, off sick or leaves the company.
With no prior experience it is difficult to manage scale and the time required to manage verification at scale. Typically, verification is assigned as an additional task on top of an employee’s standard role. This leads to longer verification times and lower quality.
Build in depth internal expertise and knowledge about your contractors, their information, processes and any risks they bring to your business. The types of documentation and the verification rules can be complex and take longer to review.
More cost effective with lower contractor numbers. Difficult to scale and meet growing contractor workforce projections.
When not verifying documents, internal resources can support the manage of your contractors or undertake other tasks. The allocation of part-time or full-time resource exclusively for this role is a requirement.

Understanding which approach is most cost effective

In-house costs

When managing verification in-house, our recommendation is that dedicated individual has a responsibility to verify your contractor’s documentation. A single individual could verify all documents, or the responsibility could be shared across those in your organisation that are experts on specific documents, for example insurances or WHS polices.

It’s important to understand the internal verification cost first in order to determine if outsourcing verification is going to more cost effective, whilst still delivering your business objectives.

Calculating the overall cost will be dependent on knowing how many contractors (businesses or workers) that your company utilises and the types and numbers of documents that need to be captured and verified. These numbers will determine the volume, and the effort required to calculate your costs and if you decide to manage your verification within your business.

To calculate the cost to verify internally, we need to make some assumptions:

  • From our experience it takes approximately 10 minutes to verify a single document, such as a drivers’ licence or training certificate. It will take longer for more complicated documents such as insurances.
  • A dedicated internal resource is allocated to verify the documents, full time (6.5 hours of focused time each weekday) or part time (3.25 hours a day).
  • A contractor or worker generally has on average 3 documents that need to be verified, and throughout the year these documents will need to be re-verified as they will either expire or will need to be rechecked. Therefore, a contractor has 6 documents that need to be verified annually.

Based on these assumptions, the table below provides a breakdown of the number of documents and contractor profiles that your internal employee will have capacity verify over time.

Duration 1 FTE
Documents Contractor profiles
Day 39 13
Week 195 65
Month 780 260
Quarter 2340 780
Biannually 4680 1560
Yearly 9360 3120

A single person will be able to support up to 3200 contractors annually and still deliver quality turnaround times for verification. If your workforce is larger or you need to capture additional documents, you would need to consider increasing your internal resources to support your verification requirements.

The number of people will determine your internal costs to support verification and help you to budget. The table provides this breakdown based on an approximate annual salary of AU $80,000.

Number of resources (FTE) Cost (AU$80,000 Annual Salary) Contractors managed
0.5 $40,000 1560
1 $80,000 3120
1.5 $120,000 4680
2 $160,000 6240

Costs to outsource

Once you have established the costs to self-manage verification, this will quickly determine if you have the budget available, and it is a useful baseline when comparing the cost to outsourced verification service.

For example, if you have 1500 contractors, your approximate internal ‘insourced’ cost would be AU $40,000. The outsourced cost therefore should be less in order to make it a viable option.

When deciding to outsource verification, there are two ways it can be funded:

1) Client pays – The client will pay for the verification of their contractors’ documentations.

Outsourcing verification is an alternative solution to taking on this service internally. Outsourced client pays verification can bring cost benefits with higher volumes of contractors.

2) Contractor pays – The contractor will be required to pay for the verification of their documentation.

Contractor pays will drastically reduce the cost for the hiring client when considering a contractor management system. But passing on this cost to the contractor will impact the nature of the relationship and forcing a contractor to pay for verification, will only be viable for contractors who receive repeat business and can justify the fee. Additionally, contractors will typically pass back this cost to the customer as ‘hidden fees’ in the overall services provided.

Selecting the right platform to align to your verification requirements

If you are looking for a contractor management system, you will need to consider verification of documentation as part of your overall contractor management solution. There are systems or companies that provide verification as part of their service, others that focus on client-managed verification, and those that provide options for both.

When deciding upon a solution, consider the size of your workforce, budget, available resourcing and importantly, your immediate and future requirements. When deciding to ‘insource’ or outsource verification there is no right or wrong approach, it’s entirely dependent on your business and its objectives.

Due to the unknowns of what is involved, you may initially decide to outsource verification and implement a contractor pays model, and then once your workforce is established, decide to take this back in-house. Having this flexibility in a contractor management solution will enable you to control how you decide to manage verification and importantly manage the ongoing relationships with your contractors.

Sitepass is a platform that provides flexibility in how you want to manage your contractor and employee workforce and manage verification of documentation. With Sitepass, you can:

  • Self-manage verification
  • Outsource verification to Sitepass’ team, or
  • Outsource verification to a provider of your choice.
  • With payments, you can also decide to take on the cost or pass the cost on to your contractors

We understand that no two businesses are the same, and Sitepass provides the flexibility you need to ensure you have can control how to manage your workforce now, and into the future.

We are here to equip you with what best fits your business verification needs. You can read more about Sitepass’ workflow verification service or you’d like to discuss your verification needs, we are here to help.