Independent Contractors vs. Employees: Pros and Cons
Your company is growing. In fact, you’re pulling 60-hour weeks just to keep up with demand. Satisfied clients are recommending your business to their friends and family, but you’re at the end of your rope, and if you don’t take on some extra help, then you might not be able to fulfill your obligations. It’s time to start thinking about how you want to build your small-business team!
Independent contractors and employees can be vital to the success of a growing small business, but before you pull the trigger and start signing checks, it’s important that you understand the short- and long-term consequences of your decision.
Employees and independent contractors are not the same. Ultimately, you will need to base your decision to hire either an independent contractor or an employee on the specific needs and limitations of your business. To make a decision that will benefit your venture, review the following pros and cons associated with hiring an employee or an independent contractor.
- Work on demand. Small-business ventures are always in flux. Today your business is headed in one direction, full steam ahead, but tomorrow you might decide to throw the brakes, reverse, or change course. Hiring an independent contractor allows you to retain your independence as a business owner; you are not beholden to a single fixed plan or course of action. Contract workers are highly trained and highly specialized, so they allow you to take advantage of new opportunities as soon as they arise, with minimal waste and greater cost control.
- Less overhead for your business. By choosing to work with independent contractors, you will save money on expenses, payroll, benefits, and other costs associated with part- and full-time employees. The average total cost of health care benefits for U.S. employees was more than $6,200 in 2003, and that number has been steadily rising for the last decade, according to the Mercer National Health Survey.
- More work for managers. In a best-case scenario, a competent and self-motivated independent contractor will require minimal direction to produce high-quality work. Unfortunately, contractors can be unreliable. As a manager, you have very little control over the work produced by an independent contractor; if the work is not up to par, then you will either need to coach the contractor through a round of revisions, or you will need to look for another freelancer to start from scratch.
- Multiple roles and improved workflow. In a small organization, staff members are typically asked to perform multiple roles and to adapt to new challenges. Making the commitment to hire a dedicated employee can help your business grow organically, streamline workflow, and build relationships with clients.
- Added responsibility. The burden of providing for your family while simultaneously bolstering your business’s bottom line becomes even greater once you take on full-time or even part-time staff.