Contractor vs Employee: Who Should You Hire?

Are you looking to hire new staff members for your organization? For a long time, hiring part-time or full-time employees has been the norm.

But, more and more companies are switching from hiring full-time employees to hiring independent contractors. Before you decide on employee status, it’s important to understand the pros and cons of each option.

Check out this contractor vs. employee guide to learn about the difference between these two roles.

What is an Independent Contractor?

As we mentioned, we’ve seen a major spike in independent contractors in recent years. According to a recent study by Upwork, 35 percent of American workers are freelancers. The total number of freelancers has increased by 4 million since 2014.

Additionally, the number of freelancers who work full time shot up from 17 percent to 28 percent. But what does it mean to be an independent contractor, exactly?

An independent contractor is someone who provides goods or services to a business under a written contractor or verbal agreement. Unlike full or part-time employees, independent contractors don’t work regular hours.

Because an independent contractor is not an employee, they’re not entitled to employee benefits.

Benefits of Hiring Independent Contractors Instead of Employees

So why do organizations choose to hire independent contractors instead of employees?

One of the biggest reasons is to save money. This is because you don’t have to offer benefits to independent contractors. You don’t have to offer them pensions, PTO, health insurance, life insurance, or 401(k) packages. This can save your company thousands and thousands of dollars per contractor.

Hiring independent contractors also offers more flexibility. This is because you can terminate contracts with independent contractors whenever you wish. A lot of organizations hire independent contractors for a specific task and then terminate the contract when the job is finished.

This means you don’t have to keep the independent contractor on your payroll services throughout the year, which can save you even more money. Another major benefit is that hiring independent contractors can reduce your exposure to lawsuits. While the obligations have increased in recent years, generally speaking, your business has far fewer compliance obligations toward independent contractors.

Downsides of Hiring Independent Contractors Instead of Employees

Before bringing on a team of independent contractors, you need to consider the downsides.

Perhaps the biggest downside is that when you hire independent contractors, you have less control over your workers. While you can monitor your employees closely, independent contractors have much more autonomy when it comes to deciding how to best perform a task.

Plus, because you’re only hiring independent contractors for a certain time frame, you’ll have workers constantly coming and going. This can make it difficult to create a culture of consistency across your organization.

Also, keep in mind that you don’t have unrestricted rights to fire an independent contractor. Your termination rights are limited to the term of your original agreement.

Contractor vs. Employee: Which Will You Hire?

Now that you’ve read this contractor vs. employee guide, it’s time for you to decide which type of worker to hire. As you can see, there are benefits to each, and many organizations operate with a mix of both.

Be sure to check back in with our blog for more hiring tips and tricks.