For business owners, there is going to be the inevitable dilemma on the choice of whether or not they wish to hire independent contractors or employees as workers. Not only is the determination of whether a worker is an employee or contractor a sometimes complicated choice, but the tax and other benefits and disadvantages of the two types of workers is another detailed issue. This article will go into detail on some of the advantages and disadvantages of hiring an employee over a contractor from an employer’s perspective.
First, if you are looking to hire an employee, it should be noted that there are differences between part and full time employees. Without going into too much detail on this difference, which requires much length to explain, part time employees are generally cheaper to hire because they do not require certain benefits, and they are often helpful if your business is seasonal.
A disadvantage of hiring an employee is increased payroll costs. The law requires you to pay your employees a share of their Social Security and Medicare taxes. Also, state unemployment insurance and workers’ compensation insurances are required to be paid by you as the employer. Together, these taxes and insurances can increase your payroll costs from 15-35%.
An advantage of hiring an employee is that you will almost complete control over when, where, and how the worker does his or her job. This can be quite advantageous, especially when independent contractors are not trained in very specialized needs for your business. More control over your employees also allows you to assign them to a wide variety of tasks that they can be trained in, whereas contractors are often hired for just one specific task that they specialize in.
Employees have several legal rights, and as a result you have more of a chance of being sued by an employee than an independent contractor. Although workers’ compensation covers many types of on the job physical injuries, there are other lawsuits which may be filed including any type of discrimination, harassment from other workers while at work, and other lawsuits.
However, an added benefit is that employees are loyal to your business alone. You will not need to worry about the competition for skilled independent contractors that often requires businesses to pay much more per hour to them than an employee. Also, employees may be more motivated by the potential for promotions and may show more commitment to the business because they are a part of the team.
Also, hiring independent contractors for a large variety of tasks can be quite time consuming. There is always the issue of arranging contracts, communicating your project needs to the contractor, and sometimes contractors are quite difficult to control. A physically present employee is generally willing to perform tasks immediately, there is no need to waste time preparing a contract for each and every task that the employee would perform, and communication with employees is much more convenient and easier than independent contractors.
These are a just few of the benefits and disadvantages of hiring an employee. Ultimately, the choice of hiring mostly independent contractors or employees is a complicated one, and for particular businesses having mostly employees as workers is efficient and for other businesses it is not.
