Every successful business owner must decide whether to recruit an employee or an independent contractor at some point, especially when the company is growing.
Keep in mind that determining whether a person is an independent contractor or an employee is critical. Furthermore, determining whether someone is working as an employee or a contractor is a narrow line that varies from case to case.
These characteristics, fortunately, will assist you in deciding between a contractor and an employee.
Nature of the Job
Some types of employment are well-suited to contracting, while others are not. It is worth noting that tasks containing sensitive or secret data can be best handled by an employee.
Certain sectors, on the other hand, tend to have a large pool of contractors to select from. You will not have trouble finding a freelancer to create outstanding content or build your website, for example. This type of labor is usually more focused on different, independent projects. As a result, finding a contractor for each specific job is simple.
Hiring full-time employees entails incurring a variety of costs in addition to salary: vacation time, workers’ compensation, health insurance, and so on. As a result, full-time employees might be significantly more expensive.
Contractors, on the other hand, can help you save money. However, if a contractor is misclassified as an employee, he or she might be costly.
In most cases, if you have authority over what the person does and how he or she does it, and you frequently monitor the individual, the worker is an employee rather than a contractor. Keep in mind that incorrectly classifying an employee as an independent contractor might result in hefty fines.
Duration of the Job
One of the first things you should think about is the scope of the work you need done. If you expect the task to continue a few months or longer, hiring an employee is a better option. A contractor, on the other hand, would be excellent if the project is just going to last a month or less.
Another factor to consider is the work’s intricacy. You will be better off hiring a full-time employee if the job necessitates in-depth understanding about your clients, industry, or organization.
You should not have to train contractors, according to the IRS and a number of state labor boards. Contractors should be able to get started right away and do the job you have engaged them for. Workers who require extensive training, on the other hand, may be classified as employees.
Contractors generally work for a short period of time, which might be advantageous for a company that operates in a fast-changing market.
In this scenario, you will bring in experts to accomplish a certain task, then replace them with fresh personnel who better suit your new requirements. You may also quickly change a contractor if he or she does not work out.
However, most businesses consider high turnover as a disadvantage since it entails a slew of additional expenditures, such as hiring, paperwork, and training. Because contractors are more self-directed in seeking clients and require less training, these expenses are usually cheaper for all contractors.
Even yet, if there is a lot of turnover, the expenditures can pile up quickly. It is also worth noting that a high turnover rate makes it difficult to establish a solid corporate culture, which is linked to long-term success.
While full-time workers may have a better understanding of the company’s aims and values, contractors are more prone to see the connection as just financial.
Freelancers are self-employed company owners who, in many cases, have their own business cards and website. Furthermore, they market their services to a variety of businesses. When you ask someone to work entirely for your firm, he becomes an employee.
Many Americans are opting out of traditional office jobs in favor of freelancing or contract employment. Employers may save money and time by hiring contractors since they will not have to pay for medical benefits, train the employee, or contribute to a 401(k) (k). If you hire freelancers, employees, or contractors, be sure you classify them correctly to prevent a lawsuit for misclassification.