Building Statement-of-Work into your talent strategy
A Statement-of-Work (SOW) is a form of contract between a company and a staffing provider or individual that agrees to pay a contract worker for their efforts based on the achievement of pre-determined project outcomes. Typically, these outcomes are formed around project way-points (sometimes called ‘Milestones’).
Statement-of-Work contracts are growing in popularity because they allow hirers of indirect workforce resources to pay for results, rather than hours worked. It means that departmental managers, with work to be performed, can look to hire specific skills for each competency or activity stream of projects they need to complete. Use of contingent workers and ‘the gig economy’ means that companies can get their work done faster, with no employment risks. SOW turns requirements for workers into ‘jobs to be done’ that can be contracted out by purchasing departments.
We’re seeing a dramatic increase in the fragmentation of jobs into tasks, ready-made service packages, and Statement-of-Work (SOW) contracts. These alternative ways of procuring workforce resources mean that organizations are able to sugar-cube their resourcing needs and source best-fit, value-for-money solutions from a large addressable market of talent.
Features of Statement-of-Work
Key attributes of a Statement of Work include:
- A description of the job to be done and of the skills and qualities needed to perform the task
- Qualification of the way-points against which the contracted worker will be paid
- Clarity over what qualifies the way-point as being complete (this is important because the hired contractor or agency needs to be clear on when they can bill for work done)
- Details of the resources provided, location of work and other meta-information related to the activity
- Confirmation of contract duration, payment terms (including how expenses will be covered), method of payment, currency etc.
- A summary of obligations of the contracted worker in terms of expected behaviors, hours of attendance etc.
Getting Statement-of-Work right
Statement-of-Work contracts are an effect hiring option for companies that have a long list of work to be done that are struggling to source the talent they need, but there are some ‘must-do-well’ aspects that companies considering SOW contracts need to get right.
Representing an exhaustive description of the requirement in your contract
When Statement-of-Work contracts are poorly formed, they can lack the level of detail needed to protect both parties from misunderstandings and contract risks. That’s why we recommend organizations that have never used SOW contracts to source good impartial advice on how to design their scheme.
Being clear on way-point outcome measures
It’s vital that the Statement-of-Work contract is clear what constitutes the completion of a way-point because any lack of clarity can result in upset should the contractor not be paid. It’s not common but occasionally disputes flair up when parties disagree on the quality of work produced. Being clear on what constitutes completion can help to avoid this.
Paying a reasonable price for work done
It’s no good thinking that the hourly rate you pay for a contractor will be anything similar to the hourly rate of a full-time employee. Contractors face a significant amount of downtime between jobs and they have to cover their ‘cost-of-sale.’ They may even have to cover their own expenses if these are not reimbursed. Bear in mind also that contractors are commonly more skilled and therefore expect to be paid for their knowledge and delivery capability. Fail to pay a reasonable market rate for your work and you’ll find your Statement-of-Work ambitions will soon go awry.
Consider direct sourcing your Statement-of-Work contracts
While organizations are used to working through agencies to source their talent and might opt to do the same for Statement-of-Work contract relationships, there’s a strong argument that businesses should explore publishing their SOW contract requirements through a serviced technology platform.
Here are some additional articles and resources on Statment-of-Work contract operations that may be of interest. The WikiSuite SOW page An example of a Statement of Work contract Department of Defense Handbook on Preparation of Statement of Work (SOW).