Ordering Contractors
Overview
In JGID, contractors are ordered differently from employees.
Although a contractor performs a service, contractor costs are managed as Instruments for estimating, purchasing and job costing purposes.
This allows contractor hire to be estimated, ordered and tracked in the same way as hired equipment.
Why Are Contractors Treated as Instruments?
Employees and contractors are costed differently.
Employees complete Worksheets and Timesheets. Their labour cost is calculated using their pay rate together with any company overheads you've configured, such as superannuation, workers compensation and other employment costs.
Contractors, on the other hand, invoice your business directly. Their actual invoice value is their true job cost, so they are managed as Instruments rather than Services.
Think of hiring a contractor the same way as hiring:
- An Elevated Work Platform (EWP)
- A scaffold
- A crane
- A machine
- Any other piece of hired equipment
You pay for the hours or days that you hire them, and that's the cost recorded against the Job.
Creating a Purchase Order for a Contractor
When estimating contractor costs:
- Create the contractor as an Instrument.
- Estimate the expected hours or days.
- Create a Purchase Order from the Job.
- Send the Purchase Order to the contractor.
Once the contractor submits their invoice, update the actual quantity to match what was invoiced.
Updating the Actual Cost
When the contractor's invoice is received, you can update the Job costing by:
- Recording the actual quantity through the Daily Labour Summary (DLS), or
- Using Use Estimated as Actual on the Instrument line item where appropriate.
This ensures your Job reflects the contractor's true cost rather than just the original estimate.
Employees vs Contractors
| Employees | Contractors |
|---|---|
| Recorded using Worksheets and Timesheets | Managed as Instruments |
| Labour costs include configured company overheads | Actual invoice value becomes the job cost |
| Paid through payroll | Paid through supplier invoices and Purchase Orders |
Best Practice
If someone invoices your business directly for their work, they should generally be managed as a contractor rather than an employee.
Managing contractors as Instruments provides more accurate purchasing, estimating and job costing.
Related Articles
- Understanding Purchase Orders
- Managing Stock
- Daily Labour Summary (DLS)