Employees vs. Independent Contractors: The Pros and Cons

Jan 19, 2022 | Business + Lifestyle

As a small business owner, you have choices when it comes to hiring. Do you want to hire full-time employees or independent contractors? They’re different in both how they work and how they’re viewed by the Internal Revenue Service, and both have their pros and cons.

According to this piece from Verizon, these are some considerations as you’re making your first or next hiring decision:

Employees:

Pros
  • These employees will feel pride in their position in your company. Most people want the security of a job, but they also want to feel the satisfaction of working for a company that they can call home. They want to feel that they are an important part of the team. If you give them that, they may go the extra mile.
  • The hourly wage for a full-time employee is often much less, because they have job security. If you were to hire out for the same work with a freelancer, you can often expect to pay quite a bit more.
  • You don’t need to scramble to find help when your workload increases. If you only rely on independent contractors and need urgent help, your favorite freelancer might be booked. Or it might cost you a lot more to hire one last minute.
  • You don’t have to wear all the hats of your business yourself. Instead, you can delegate tasks permanently to others. This frees up your time to do the tasks best suited for you.
  • You don’t need to continually train staff on how you like things done. Your employees know you and can do the work without the need for continual direction.
  • If you want to take a vacation, you can be assured that someone is holding down the fort for you in your absence.
Cons
  • Most full-time employees expect benefits, like health care and vacation time. As you interview potential candidates, they will most likely be interviewing with other companies as well, who offer such benefits.
  • You’ll need to pay their salaries like clockwork, even if your business has a lull. To cover their paychecks, you’ll need to have a reserve of money in your bank account.
  • You’ll have specific payroll paperwork that is legally required. Along with this, you’ll need to withhold your employees’ taxes, social security and Medicare.
  • You are responsible for your employees’ training and professional licensing requirements. These vary from state to state.

Independent Contractors:

Pros
  • Although you usually pay more per job or per hour, you will most likely save money overall since you aren’t required to pay them any benefits and do not need to commit to a salary.
  • You have greater flexibility. When you work with an independent contractor and it isn’t a good match, you simply don’t hire them again. When you have an employee that doesn’t work out, you may need to fire them, which isn’t always easy.
  • You can hire the right person for the task needed, contracting someone with a specialized service. They often have many years of experience, so you don’t need to train them.
  • They are responsible for their own permits and professional licenses.
Cons
  • You lose some control over how tasks are preformed, because you can’t closely monitor their work. You can guide them, but usually they aren’t on site and will run their business their way.
  • They are hired short term, so you might not get the same worker for the next project. They usually operate on a first come, first serve basis.
  • Many have no sense of company loyalty, but are a hired gun for one specific job. They are not part of your staff.
  • They will not promote your brand, but their own. Their work is done under their business name.
  • All copyrights will be owned by the independent contractor, unless you draft an agreement stating otherwise.

Understanding the difference between and pros and cons of full-time employees vs. independent contractors can save you a lot of headaches, plus, enable you to set up your business with the type of workers you need for long-term success.

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