A practical playbook for managing contractors: Processes that scale from one to fifty

Managing contractors effectively requires clear processes without bureaucracy. This playbook covers scoping, milestones, approvals, and payouts—giving you a repeatable workflow that scales from one contractor to dozens without becoming administrative overhead.

Starting right: Scope of work

Every contractor engagement should start with a clear scope of work (SOW) that defines what you're actually paying for. A good SOW prevents scope creep, payment disputes, and misclassification risk.

What to include in a scope of work:

Deliverables: Specific outputs the contractor will produce. Examples: "Three website mockups," "Complete API integration," "Monthly financial analysis." Be specific about what success looks like.

Timeline: Start date, key milestones, and final delivery date. Example: "Start January 15. Deliver mockups by February 1. Final delivery March 1."

Payment terms: Total amount, payment structure (milestone-based or time-based), and payment schedule. Example: "Total $10,000. 25% upon kickoff, 50% upon design approval, 25% upon final delivery."

Intellectual property ownership: Who owns the work product. Usually: "All work product is owned by [Client Company]" or "Contractor retains ownership of underlying methodology but [Client Company] owns deliverables."

Termination clause: How either party can end the engagement. Example: "Either party may terminate with 7 days written notice. Payment is due for all completed milestones."

How long should it be? Keep it simple—one to two pages is usually sufficient. A SOW isn't a legal document; it's a shared understanding. Clarity matters more than length.

Structuring work into milestones

Breaking work into milestones creates natural checkpoints for review, quality control, and payment. Milestones also prevent the contractor from doing all the work before getting paid, and they let you verify quality along the way.

Typical milestone structure for project work:

Kickoff milestone: Project starts. Contractor confirms understanding, setup, and dependencies. Payment: 10-25%. Timing: Day 1.

Mid-project milestones: Key deliverables or phases. For a website redesign: design mockups complete, development complete, testing complete. Payment: 25-40% per milestone. Timing: Spread across project duration.

Final delivery: All work complete and approved. Handoff documentation, code repository access, training, etc. Payment: 35-50%. Timing: Project end.

Post-delivery (optional): Revisions, support period, or optimization. Payment: 10-15%. Timing: After initial delivery if applicable.

For ongoing work (retainers, advisory, support), monthly milestones work well. The milestone is simply "Month 1 complete," with clear deliverables or hours expected.

Milestone payment percentages: Structure the percentage so the contractor receives meaningful money at each milestone, reducing their risk. Avoid 90/10 splits (most payment at the end) because the contractor bears risk until the very end.

Review and approval workflow

Establish a simple review process for each milestone. This keeps projects on track and creates documentation for audits.

Step 1: Contractor submits. The contractor uploads the deliverable (files, mockups, code, report, etc.) with a brief summary. Example: "Design mockups complete. Three options ready for review. Files in shared folder."

Step 2: Manager reviews. Someone on your team checks the deliverable against the SOW requirements. Does it match what was promised? Is quality acceptable? This should take 2-3 business days.

Step 3: Feedback or approval. You either request revisions ("Mockup 2 is strong. Can you adjust the color scheme?") or approve for payment ("Approved. Ready for payment."). Communicate clearly.

Step 4: Payment triggered. Approved milestones move to your payment queue. This happens within 5-7 business days of approval.

Why keep this simple? Contractors appreciate fast feedback and timely payment. Long review cycles or slow payment frustrate contractors and damage relationships. Aim for a two-week cycle maximum from submission to payment.

Payment execution and tracking

Once a milestone is approved, execute payment promptly and keep clear records.

Batch payments for efficiency. If you have multiple contractors, batch approved payments weekly or bi-weekly. This reduces per-payment fees and reduces administrative overhead. Process all approved milestones on Thursday, pay on Friday.

Use the contractor's preferred method. Ask contractors their preference—Wise, PayPal, Payoneer, or bank transfer—and stick with it. This reduces friction.

Attach payment proof immediately. When you send payment, save the receipt or screenshot showing the transaction ID, amount, date, and recipient. Attach this to the milestone record.

Request confirmation. Send a message: "Payment sent for [Milestone]. Amount: $[X]. Transaction ID: [ID]. Please confirm receipt." Contractors should confirm within 24-48 hours.

Log everything. Record the approval date, payment date, amount, payment method, transaction ID, and confirmation date. This creates a complete audit trail.

Communication rhythm that works

Regular communication keeps projects on track without micromanaging. Establish a predictable rhythm so the contractor knows what to expect.

Weekly async updates: Ask contractors to post progress, blockers, and next steps once per week. No meeting required—just a written update. This keeps you informed and creates a record.

Bi-weekly alignment calls: 15-minute calls every other week for discussion, questions, and feedback. Keep these focused and brief.

Per-milestone review meetings: Before payment approval, have a brief walkthrough of the deliverable. 30 minutes is usually enough. This ensures alignment on quality and completeness.

As-needed communication: Use email or chat for quick questions, clarifications, and urgent issues.

Why this rhythm? Weekly updates keep you informed. Bi-weekly calls prevent misalignment. Per-milestone reviews ensure quality. As-needed communication handles urgent issues. This is enough structure to manage contractors effectively without being micromanaging.

Common management mistakes

Vague scopes. "Build a website" is too vague. Results in scope creep, endless revisions, and payment disputes. Define specific deliverables, timeline, and success criteria upfront.

Slow approvals. Taking two weeks to review a deliverable delays payment and frustrates contractors. Aim for 2-3 business days max. If you can't review that quickly, you're too busy for this contractor.

No documentation. Keeping agreements in email or Slack creates compliance risk. Store contracts, milestones, approvals, and payments in one organized location. This matters if audited.

Treating contractors like employees. Setting fixed hours, requiring daily check-ins, or providing detailed task direction can trigger misclassification. Contractors should control how they work. Define outcomes, not process.

Inconsistent communication. Sometimes you check in weekly, sometimes monthly. This creates uncertainty. Establish a rhythm and stick with it.

Paying late. Approving a milestone but delaying payment damages trust. Pay within 5-7 business days of approval.

Scaling from a few contractors to dozens

As your contractor base grows, you'll need systems to prevent chaos:

Centralized tracking: Keep all contractors, contracts, milestones, and payments in one location—not scattered across email, Slack, spreadsheets, and Google Drive. One system of record prevents mistakes.

Standardized templates: Create SOW, milestone, and payment term templates. Contractors and your team benefit from consistency. Adjustments are faster when you start with a template.

Clear approval ownership: Define who can approve milestones and payments. Is it the project manager? Finance? The executive sponsor? Clear ownership prevents delays and confusion.

Batch payment processes: Run payment batches weekly or bi-weekly instead of on-demand. This reduces fees, creates consistency, and makes accounting easier.

Audit trail: Keep complete records for finance and compliance. Every contract, approval, and payment should be documented.

Contractor management (even simple spreadsheet tracking) becomes essential above five contractors. You need to see all contractors, their status, payment status, and upcoming milestones at a glance.

Handling common situations

Missed milestone deadlines: Communicate early if delays are expected. Assess the reason—was scope unclear? Is the contractor overcommitted? Adjust the timeline or consider termination if the pattern continues. Document everything.

Quality issues: If a deliverable is below standard, provide specific feedback and request revisions. Don't approve and pay for substandard work. But be fair—if the issue is unclear requirements, that's partially your responsibility.

Scope creep: A contractor asks for more work or deliverables. This is natural. Decide: can you approve the additional work with increased payment, or is it out of scope? Communicate clearly either way.

Contractor becoming unavailable: Illness, family emergencies, or overcommitment happens. Discuss timeline adjustments early. If the contractor will be unavailable long-term, discuss termination and payment for completed milestones.

You want to extend engagement: If a contractor is performing well, extend the contract before it ends. Discuss new milestones and payment terms. Don't let good contractors leave just because you didn't ask them to stay.

Practical workflow summary

Here's the complete workflow:

Week 1: Develop scope of work with contractor. Define deliverables, timeline, milestones, payment terms. Both sign.

Week 2: Contractor begins work. Weekly async updates start.

Week 3-4: First milestone approaches. Bi-weekly call if needed for alignment. Contractor submits deliverable.

Week 4-5: You review deliverable (2-3 business days). Approve or request revisions.

Week 5: Payment approved. Send payment. Request confirmation.

Week 5-6: Contractor confirms receipt. You log completion.

Repeat for each milestone until project completion.

The bottom line

Managing contractors effectively requires clear scopes, milestone structure, fast approval, and timely payment. Establish a communication rhythm that prevents misalignment without micromanaging. Keep processes simple but consistent.

Use templates to standardize SOWs, milestone structures, and payment terms. This consistency makes management faster and reduces errors.

Document everything—contracts, approvals, payments, confirmations. This protects you in disputes and makes audits straightforward.

The workflow described here scales from one contractor to dozens. The key is consistency: same SOW structure, same milestone format, same approval process, same payment rhythm. Consistency reduces friction and makes management predictable for both you and your contractors.

Invest time upfront in clear scoping and communication. This investment pays dividends in reduced disputes, faster projects, and stronger contractor relationships.