So, your business is taking off. You’re making more sales, grabbing more customers’ attention and getting busier. But it’s definitely getting to be a little too much for you to handle yourself, and it’s time to build a team to support your efforts. Yet, figuring out what and who you need can be a job of its own!
Look, you know you need help. But 1099 this and W-2 that is starting to make your head spin. As your HR Insider, I’m here to explain the difference between hiring employees and hiring contractors, and which option is best for your business.
Let’s jump in!
Contractors Deliver, Employees Execute
Independent contractors and employees can fulfill the same business needs, it’s the how that makes the difference.
When you hire a contractor, think of it like ordering takeout – you place your order and the restaurant takes care of the rest. They’ll cook in their own kitchen; they make your food on their schedule, and they may not be available after delivery to make any changes.
Similarly, you would hire a contractor if your main concern is the work simply getting done. Dependent on your agreement, contractors typically use their own equipment and workspace, make their own schedules and have fulfilled their obligation once you receive the work you requested.
An employee, on the other hand, is like having a personal chef. You can tell them what meals you’d like to eat and exactly how you like your food prepared from A-to-Z. They also will cook in your kitchen, with your pots and pans.
An employee in your business adheres to your schedule and follows your timeline and instructions to complete their work. You might also need to provide them with the equipment to get the job done and have them work on-site. They rely on your directions to be successful.
Will You Be Their CEO or Their Client?
The saying is true: it costs to be the boss! See, employees are covered by employment laws and all the benefits of a W-2. This means you’re responsible for paying into Social Security, Medicare and unemployment insurance on behalf of each employee. Your employees are also eligible for workers’ compensation and health insurance benefits.
None of that applies to contractors, though. You are technically a client of their business. After you enter into an agreement with a contractor, they’ll send you an invoice for the work they’ve done. You won’t take out any taxes or benefit money as they’re responsible for paying self-employment taxes and securing their own insurance.
Contractors Specialize, Employees (Can) Generalize
When you hire an employee, they’ll have a specific job title but are still available for other business functions. Like your customer service specialist might spend most of their day chatting on the phone with customers or answering emails, but they also could handle some data entry, research and admin tasks.
But contractors usually have one primary responsibility, and that’s that. For example, you contract a writer to create your blog posts or a designer to create your logo. That’s the only thing those contractors do for you … they won’t be picking up miscellaneous tasks throughout the day.
Do You Want an Exclusive or Open Relationship?
There’s a good chance your contractor will be working with other clients throughout the duration of your partnership. They need to keep selling and marketing their services to others to keep their business going. They might also be subcontracting work to other contractors or consultants … something you all should discuss before they sign the contract.
Employees, however, are dedicated to your business for the number of hours you choose, whether it’s 40 hours full-time or a fraction of that as a part-timer. Even if they decide to work a second job, they’re still obligated to work their scheduled shift.
Barbara Mason is a career consultant that brings over 20 years Human Resources experience and has been in senior level roles for Fortune 500 companies. She is the owner and CEO of Career Pathways Consulting and her passion is helping career professionals stay, flow, or go in their career.
To learn more about working with her, visit www.careerpathwaysconsulting.com.