The workforce of many companies today consists of a mix of full-time and contract workers. When considering whether your recruitment strategy should include independent contractors or employees, there are many rules and regulations to consider as well as practical applications.
Employees vs. Independent Contractors
Employees work for a single employer, who can dictate how, where, and when they work. they typically receive training for their job duties and are overseen by a manager. Companies provide employees with the tools they need to do their job and can dictate rules around hours worked.
Employees are entitled to company benefits such as 401(k) matching, health insurance, and paid time off. They are also eligible for legal benefits like Unemployment insurance and Workers’ Compensation.
Independent contractors, on the other hand, may work with multiple clients and have the right to decide when, where and how they complete the work outlined in their contract. They bring their own expertise to a job and do not require any additional training. In general, they will provide their own tools and equipment needed for work.
Unlike employees, independent contractors are not entitled to company legal benefits and are responsible for paying both the individual and employer sides of taxes (FICA). They are paid by invoicing clients for work completed.
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What Type of Worker Should I Use: Independent Contractor or Employee?
1. Consider what type of work you want done
Employees are best suited for ongoing business needs whereas independent contractors are helpful for filling project-based needs. For example, work or services that are a core competency of your business should probably be filled by employees. Or if there is a need for more work that internal employees are already doing, a new employee should fill that gap.
However, if the work you need done is a project that can be defined as a series of deliverables, independent contractors are a great option. This type of work should require a specialized skill set that isn’t part of your company’s core employee base. Using independent contractors for project-based work allows you to keep internal teams focused on the core goals and day-to-day running of your business.
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2. Think about the type of skills you need
Independent contractors have expertise in all sorts of industries from marketing and graphic design to IT and management consulting. If you need quick access to specialized expertise, independent contractors are often the best place to go. You’ll be able to recruit from a talent pool of experts to match the best person to the project.
Another benefit to engaging an independent contractor—if the type of work you need done aligns with this type of worker—is that a contractor is more cost-and resource-efficient than hiring an employee. Part of this is because independents are responsible for providing their own benefits and paying both the employer and employee portion of Social Security and Medicare (FICA).
Because independents come with a level of expertise, you can also save time and resources as compared to finding, onboarding, training, and managing a full-time employee. Lastly, if you choose to directly source independent talent through a marketplace, you can save on costly markups from third-party staffing or consulting firms.
On the other end of the spectrum, if you need more people to perform services that define your business or brand, you’re better off hiring a full-time employee. From a legal perspective, this will help you mitigate the risk of worker misclassification.
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3. Decide how much oversight the work requires
Control is an important factor to keep in mind when deciding whether to engage an independent contractor or hire an employee. Employees are typically trained on their job duties and a manager oversees and evaluates their work
But independent contractors come with their own expertise and training—that’s the reason you’re hiring them, after all. Independents operate as their own business entity, so it’s easiest to imagine working with them as a business-to-business relationship. Independent contractors are free to determine when, where, and how they work unless otherwise specified in their contract. While they will be working together with a project team, the level of oversight is much less than with that of an employee.
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