What Are the Benefits of Independent Contractors Over Employees or Vice Versa?
Many employers are utilizing independent contractors instead of hiring additional employees. However, before you work with independent contractors, it is important to understand the differences between independent contractors and employees. Some of the differences between employees and contractors might translate into a benefit for your company. However, some differences could work against the best interests of your company.
What is an Independent Contractor?
Independent contractors are also known as freelancers. These individuals might work for several clients or customers simultaneously. They are self-employed. Therefore, they decide which jobs they are willing to take and which jobs they want to decline.
According to the Internal Revenue Service, the relationship between the parties determines whether the person is an employee or an independent contractor. Three key areas are examined – behavioral control, financial control, and type of relationship.
Employers exercise a great deal of control over their employees. They tell employees when to report to work, when to take breaks, what tasks to perform, and how to perform those tasks. An independent contractor has more control over these aspects. The client hires an independent contractor to perform a job. However, the contractor decides when and how to complete the job within the terms of the agreement.
Benefits of Hiring an Independent Contractor
A lack of control over how a project is completed can be a disadvantage for some companies. A business owner who wants or needs to have complete control over how a project is completed may want to hire an employee. However, if a company is not concerned with how a project is completed as much as the project is completed correctly, an independent contractor might be a great option.
Some of the benefits of hiring an independent contractor include:
- Lower Overhead Costs – The independent contractor provides the tools and equipment to complete the job. Most contractors maintain an office, so you do not need to provide a desk or workspace for a contractor.
- No Payroll Taxes – The independent contractor is responsible for payment of all payroll taxes.
- No Health or Retirement Benefits – Independent contractors are not eligible for health, retirement, or other benefits offered to employees.
- Flexibility – Companies hire independent contractors for work on demand. If work increases, the company can hire additional contractors instead of short-term employees.
- Trained and Ready to Work – Independent contractors are trained and ready to begin work immediately. You do not need to worry about a training period.
- Access to Specialized Training – Small businesses benefit from hiring independent contractors who have specialized training. Instead of hiring a full-time IT person, bookkeeper, or human resources manager, the company can outsource these jobs to independent contractors.
Jobs that are suited for independent contractors include tasks that are short-term or defined. The work can be performed without much supervision.
Benefits of Hiring Employees
On the other hand, hiring an employee also has benefits. You must provide the tools to complete the job, and you are required to pay payroll taxes. However, employees are generally more loyal to the company than an independent contractor who works for several companies.
Also, you have more control over how an employee performs tasks. You can also assign multiple tasks to the employee, which can benefit small businesses. Employees may fill several roles within the company.
Hiring employees can also improve workflow. Having an employee who works during specific hours can be easier to coordinate than managing multiple freelancers with different deadlines.
Do You Have Questions About Independent Contractors and Employees?
Agreements with independent contractors are governed by contract law. Employees have numerous protections under labor laws. Both situations can lead to legal problems for a business. If you have questions about independent contractors or employment law, talk with a Coral Springs business attorney.
Call 954-324-3651 or contact us online to schedule an appointment to discuss your situation and concerns with an experienced Coral Springs business lawyer.