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By David Brown, co-CEO of Techstars

Here’s a “hack” that I’ve observed growing startups often attempt. I call it the “contractor hack.” And it can be dangerous.

It starts off because a department head doesn’t have the budget to hire a person. To go through the approval process to get one hired is an impossible gauntlet. So instead, they use the contractor hack.

Here is the hack: first, you hire a temporary contractor. It’s not hard to do, or even to get approval for. You just say, “I know the hourly rate is a bit high, but it’s only for a short time to get over a hump, and we can cancel them at any time.” Easy-peasy. You have a “temporary” contractor.

After a  year or so, your contractor becomes indispensable. Then you say you have a great idea: “Let’s save some money by converting this contractor to a full time role. We can pay her less, since we’ll be providing health or other benefits!” Genius.

Suddenly, you have lots of employees who started as contractors, and your middle managers have figured out how to hack your hiring system. If you are a startup, please don’t get into or allow this habit as you scale. Ask your CFO to keep close track of contractor expense and put a vice grip on this type of nonsense.  

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David Brown David Brown
David is a founder and co-CEO of Techstars and is one of the original founders of Pinpoint Technologies, Inc. David has a B.Sc. degree in Mathematics and Computer Science from McGill University, Canada.