Contractors versus Salaried Employees

When deciding whether to hire a contractor or employee, it is important to consider the nature of the work to be done and the length of time it will take. Contractors are typically paid for their services per project, while salaried employees receive a regular paycheck for their work. Contractors are also usually responsible for their own taxes, while employees have taxes withheld from their paychecks.

Benefits

There are benefits to both employment styles and depending on your business goals and financial flexibility it is important to weigh the benefits of both.

Benefits of hiring an independent contractor include shorter hirer periods for the employee allowing for changes as needed, you are not responsible for their taxes or benefits, and contractors may have specialized skills that employees do not possess.

Benefits of hiring a salaried employee include stability for your company, loyal referral source of future employees or customers, and employees are typically more invested in their work since it is their main source of income.

Drawbacks

There are also drawbacks to both employment styles. Contractors may be more expensive than employees, since they are paid per project rather than hourly. However, contractors are not entitled to the same protections and benefits as employees, such as unemployment insurance or workers' compensation.

There are also a few downsides to hiring salaried employees – they can be more expensive since you have to offer benefits, vacation time, and sick days, and if you need to downsize your company it is harder to let go of salaried employees. Contractors, on the other hand, offer flexibility and lower costs since they are not typically eligible for benefits. However, contractors can be less reliable since they often work on multiple projects at once and may not have the same level of commitment to your company.

Hiring Process

When you decide to hire an employee, rather as an independent contractor or a permanent employee, keep your business goals in mind. Consider the type of work to be done and how long it will take. Also, evaluate your budget and decide what you can afford to pay. If you need someone for a one-time job, then contractors would be ideal. If you need someone for an ongoing position, then hiring an employee would be a better option.

When interviewing potential candidates, ask about their experience as both a contractor and an employee. Find out what they liked and disliked about each type of work arrangement. Also, ask about their availability and whether they have any other projects they are working on. Contractors should be able to give you a list of references from previous clients and potential employees should have a prior employment reference to provide.

Deciding to expand your company by adding additional support is an exciting step. It is important to carefully consider the pros and cons of hiring either an independent contractor or a salaried employee to ensure that you are making the best decision for your business. Schedule a strategic business session with Hunkin Law to learn more about best hiring practices for your unique business.