Growing businesses have unique and varying needs. As you grow you may find yourself using more advanced tools & technology. With these upgrades, what do you do if something breaks down? Since you’re not an IT company, you need to hire someone. But with hiring comes other challenges like figuring out the type of employee you should hire.
In this article, we’ll discuss the differences between hiring an employee and a contractor. We’ll consider if it really matters, what are the differences, and how to figure out what you need for your company.
According to Kinesis Inc., in the professional services industry, each employee represents roughly $100-$200k in annual top-line revenue. So making a bad hire isn’t really an option for companies that don’t have resources to spare.
Apart from the income incentive of making the right hire, there are many differences in your relationship with a contractor and an employee. These differences include taxes, the degree of control over how work is done and work hours, how many jobs the employee can take on, benefits they qualify for, and even how they’re paid.
When choosing who to hire, it’s important to know that the conditions they work under may automatically classify them as an employee, and you could be liable to fines for misrepresenting them. You can find out which 20 factors the IRS uses to classify people as employees here. So, it’s important to understand the differences.
When you’re choosing an employee over a contractor, you have to take into account the differences in financial and behavioral control as well as the change in your working relationship. Let’s look at 6 ways these change how you work together.
Now that you understand the differences between contractors and employees, it’s time to think about your business needs. You can use these questions to help you analyze your situation:
Employees are best suited for jobs that need to be performed, require set hours, and are a major part of your business. For example, if you run a web design company your designers shouldn’t all be contract workers. This would make it difficult to deliver quality work consistently.
Contractors are best suited for temporary jobs, small necessary projects, and jobs that require professional expertise that your team doesn’t have. It’s also good to hire contractors for jobs that don’t fall within your business’ scope of work. You wouldn’t want to hire full-time web developers if you’re an accounting firm.
In this article, we talked about the differences between a contractor and an employee, why it matters, and how you can figure out what you need. We hoped this helped you with your small business’s hiring needs. If you want to improve your hiring process even further, download our ebook Supercharge Your Hiring Process.