A practical playbook for managing contractors
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.
Scoping and statement of work
Every contractor engagement should start with a clear scope of work (SOW) that defines:
- Deliverables: Specific outputs the contractor will produce
- Timeline: Start date, milestones, and final delivery date
- Payment terms: Total amount, milestone-based or time-based, payment schedule
- IP ownership: Who owns the work product and any related intellectual property
- Termination: How either party can end the engagement
A well-written SOW prevents scope creep and payment disputes. Keep it simple—one to two pages is usually sufficient.
Milestone structure
Breaking work into milestones creates natural checkpoints for review and payment:
| Milestone Type | When to Use | Payment % |
|---|---|---|
| Kickoff | Project start, deposit | 10–25% |
| Mid-project | Key deliverable or phase | 25–40% |
| Final delivery | Completion and handoff | 35–50% |
| Post-delivery | Revisions or support period | 10–15% |
For ongoing work, monthly milestones work well. For project-based work, align milestones with natural phases or deliverables.
Review and approval workflow
Establish a simple review process for each milestone:
- Contractor submits: Deliverable uploaded with brief summary
- Manager reviews: Check against SOW requirements within 2–3 business days
- Feedback or approval: Request revisions or approve for payment
- Payment triggered: Approved milestones move to payment queue
Keep review cycles short. Contractors appreciate fast feedback and timely payment.
Payment execution
Once a milestone is approved, execute payment promptly:
- Batch approved payments: Process weekly or bi-weekly to reduce fees
- Use contractor's preferred method: Wise, PayPal, Payoneer, or bank transfer
- Attach payment proof: Screenshot or receipt from payment provider
- Request confirmation: Contractor confirms receipt in your system
Communication rhythm
Regular check-ins keep projects on track without micromanaging:
| Frequency | Format | Purpose |
|---|---|---|
| Weekly | Async update | Progress, blockers, next steps |
| Bi-weekly | 15-min call | Alignment, questions, feedback |
| Per milestone | Review meeting | Deliverable walkthrough |
| As needed | Slack/email | Quick questions, clarifications |
Common management mistakes
Avoid these pitfalls when managing contractors:
- Vague scopes: Leads to scope creep and payment disputes
- Slow approvals: Delays payment and frustrates contractors
- No documentation: Makes audits difficult and creates compliance risk
- Treating contractors like employees: Can trigger misclassification issues
- Inconsistent communication: Creates uncertainty and reduces quality
Scaling your contractor operations
As you grow from a few contractors to dozens, you'll need:
- Centralized tracking: One place to see all contractors, contracts, and milestones
- Standardized templates: SOW, milestone, and payment term templates
- Approval workflows: Clear ownership for review and payment approval
- Batch payment processes: Weekly or bi-weekly payment runs
- Audit trail: Complete records for finance and compliance
Frequently asked questions
How detailed should my SOW be?
Detailed enough to prevent disputes, but not so prescriptive that it looks like employee direction. Focus on outcomes and deliverables, not how the contractor does the work. One to two pages is usually sufficient.
Should I use time-based or milestone-based payments?
Milestone-based is generally better for project work—it aligns payment with value delivered. Time-based (hourly or monthly retainer) works for ongoing support or when scope is less defined. Avoid hourly for contractors if possible; it can create misclassification risk.
How quickly should I pay contractors after approval?
Aim for 5–7 business days. Faster is better for contractor satisfaction. If you batch payments weekly, communicate that timeline upfront so contractors know when to expect payment.
What if a contractor misses a milestone deadline?
Communicate early if delays are expected. For missed deadlines, assess the reason—was the scope unclear, or is the contractor overcommitted? Adjust the timeline or consider termination if the pattern continues. Document everything.
Can I manage contractors without special software?
For one or two contractors, spreadsheets and email work. Beyond that, you'll want a system to track contracts, milestones, approvals, and payments in one place. Kontrable is built specifically for this workflow without EOR overhead.