Misclassifying work is one of the fastest ways to light money on fire in contingent hiring. When a Statement of Work (SOW) is used to backdoor staff augmentation — often complete with attached job descriptions (JDs) or position descriptions (PDs) — you pay services pricing for what is effectively time & materials headcount. You also inherit risk you probably haven’t priced.

Cameron Robinson, Head of Enterprise Solutions, calls it out:

“If you’ve got service provider SOWs with PDs or JDs attached to them, then two bad things are probably happening in your business. One: you’re wasting money. Two: you’re exposed to extra risk.”

And it’s not small change.

“Both are unnecessary and can be avoided. The direct cost savings could be 20% or more.” – Cameron

But first, what’s the difference between SOW and Contractor?

“Hiring a contractor to perform a role or fulfil a position on a project for a period of time is a very different proposition to executing a Statement of Work to govern the services (and outcomes) a company is contracted to deliver to you,” says Cameron.

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Put simply, if you need extra hands in a defined role reporting into your team, engage a Contractor or Temp. You pay for time (day or hour) and success looks like work performed to standard during the contracted period.

If you need a supplier-owned outcome, milestone, or deliverable with defined acceptance criteria, engage a SOW or Services Engagement. You pay for deliverables or milestones, and success looks like documented outputs accepted, IP transfer, and completion sign‑off.

“Fitting a job description and then turning up for work are not acceptable deliverables.”

Where misclassification creeps in

Misclassification often arises under three common scenarios. First, when a project is behind schedule, a leader may quickly engage a consultancy already on the books and, rather than defining outcomes, simply attach a job description to a Statement of Work. This turns what should be an outcome-based services engagement into an expensive form of staff augmentation.

Second, budget silos can create unintended workarounds. For example, a headcount freeze might block hiring through normal channels, yet project budgets remain open. In this situation, a services vendor may effectively become a pseudo-staffing channel, with managers using SOWs to sneak in extra personnel.

Third, low procurement maturity can also be a culprit. Without clear guidance or templates, managers often fall back on whichever document they last used or received, regardless of whether it’s fit for purpose. This inconsistency leads to misaligned contracts, pricing confusion, and increased compliance risk.

What are the signs you could be overpaying and taking on risk?

“If you come across a consultancy SOW where the deliverable is basically just ‘turn up for work’ and/or the daily rate hasn’t been benchmarked, we should chat.”

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Potential red flags:

• SOW line items include named individuals and specific day rates, which could be a sign that you’re paying consultancy pricing for individual staff rather than outcome-based work.

• There is no outcome-focused language in the SOW; milestones might be described as little more than monthly timesheets instead of tangible deliverables.

• Rates vary significantly across similar roles or projects, suggesting there isn’t standard benchmarking, and you could be overpaying.

• Extensions are routinely approved without proper commercial review, which could mean cost and scope are not being actively managed.

• Tax or employment status is unclear. For example, it might not be evident who the employer of record is, which could create potential compliance and liability issues.

Steps to get classification back on track

Cameron’s advice for leaders who want to help managers “follow the right path” without slowing the business:

1. Decision tree – Simple guided intake: Do you need an outcome or a person? Who manages the work? Is success defined by deliverable or time spent?
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2. Channel guide – Map approved sourcing paths: Contractor payroll, MSP panel, consultancy/SOW, freelance marketplace, internal mobility.
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3. Rate benchmarking – Central library of market-aligned role rates and margin guidance
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4. Paper trail discipline – Capture docs in a single system; version control amendments and extensions.
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5. Lightweight training – 30-minute manager modules with real examples of getting this wrong (cost and risk) and right (savings and speed).

What does good look like?

When classification is working, the business sees tangible value across cost, risk and efficiency:

• Over 90% of engagements are routed through the correct channel the first time. This minimises costly rework, reduces onboarding delays and ensures suppliers are engaged appropriately.

• Variance to benchmark rates drops below 10%, which means you are consistently paying market-aligned rates and avoiding inflated consultancy pricing.

• Outcome acceptance is tied directly to payment in SOWs, ensuring that the business pays only for measurable, delivered outcomes rather than time spent.

• Automatic alerts on contractor tenure limits and misaligned documents help avoid compliance risks, prevent costly overextensions and enable timely contract reviews.

Suspect you’re paying services pricing for staff augmentation? Let’s talk.

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