Contracting Or Hiring Employees? What You Need To Consider

hiring employees
What you should consider when contracting or hiring employees. Image: Flickr

There comes a time when every successful business proprietor must establish whether to hire an employee or independent contractor, especially when the business shows growth.

Bear in mind that the proper classification of a worker as an independent contractor or employee is essential. Furthermore, the determination of somebody operating as an employee versus contractor can be a fine line that alters on a case-by-case basis.

Fortunately, these factors will help you decide between a contractor and an employee.

Nature of the Job

Some kinds of work lend themselves really well to contracting while others don’t. It’s important to note that work involving sensitive or confidential information might be better accomplished by an employee.

Certain industries however tend to have a huge base of contractors from which to choose. For instance, you won’t experience difficulty locating a freelancer to write great content or design your website. These kinds of work are typically more oriented to separate, distinctive projects. Therefore, it’s easy to engage a contractor for every individual project.

Cost

Hiring full-time workers implies taking on various expenses besides salary: vacation time, workers comp, health insurance etc. As a result, full-time workers can be considerably more costly.

On the other hand, contractors can save you some of the costs. However, a contractor can be expensive in the event that he or she is a misclassified employee.

Generally, if you control what the worker does and how he or she does it, and you supervise the worker regularly, he or she is an employee rather than a contractor. Bear in mind that if you classify an employee as an independent contractor improperly, you could face a considerable penalty.

Duration of the Job

One of the first things you must consider is the breadth of the work you need accomplished. If you expect the work to last a few months or longer, you would be better off with an employee. However, if the project will last a month or less, a contractor would be ideal.

Another aspect of the work to consider is complexity. If the work requires intricate knowledge of your customers, industry, or company, you’ll be better off with a full-time employee.

Training

According to the IRS and numerous state labor boards, you shouldn’t have to train contractors. Contractors should be able to start immediately, accomplishing the task you’ve hired them for. Conversely, if workers need considerable training, they may qualify as employees.

Turnover

Contractors typically work for a brief, specified duration; this could be positive for a business that’s operating in an environment that experiences rapid changes.

In this case, you’ll bring in people with expert skills to perform a specific task and then substitute them with new people that match your new needs. Additionally, if a contractor doesn’t work out, you can easily replace him or her.

However, most companies have a negative view of a high turnover because it comes with all kinds of related costs, for instance recruiting, paperwork, and training. You’ll discover that these costs are generally lower for every contractor because they’re more self-directed in finding clients and need less training.

Still, the costs could add up in the event of a high turnover. It’s also important to note that a high turnover rate makes it hard to incorporate a strong corporate culture, which is associated with long-term success.

While full-time employees can carry a sense of the company goals and values, contractors are more likely to perceive the relationship as strictly monetary.

Exclusivity

Actual freelancers are self-employed business proprietors who often have their own business cards and website. Furthermore, they advertise their services to different companies. Requesting the person to work for your company exclusively gives him an employee status.

Final Thoughts

Numerous American workers are forgoing the conventional office job to work on a freelance or contractual basis. For employers, having contractors could imply a savings of money and time because they don’t need to take the time to pay medical benefits, train the worker, or contribute to a 401 (k). If you opt for freelancers, employees, or contractors, ensure you observe proper classification to avoid a misclassification lawsuit.

Dailey Bookkeeping Services is a Xero Certified SILVER Partner and a QuickBooks Online Certified Advisor, so if we can help you with your contracting needs, just give us a call, we would love to help you!  The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can!  Feel free to visit our website at http://www.daileybookkeeping.com.

Company-logo-facebook180-x-180-pixels

Leave a Reply

Your email address will not be published. Required fields are marked *