The decision of whether to hire an independent contractor or employee for a given job is a significant one. It’s important to be aware of the upsides and downsides of each choice. To begin with, an employer must be able to identify the difference between the two. A good rule of thumb is if the employer is able to direct how the work is done, the worker is an employee. If the employer merely controls the result of the work, than he or she has hired an independent contractor. There are distinct benefits and disadvantages to each staffing approach.
The primary advantage of hiring an independent contractor over an employee is financial. The employer only pays for the work that actually needs to get done. Hiring an independent contractor comes with lower overhead: Tax expenses such as payroll and record maintenance expenses decrease. Moreover, health insurance, paid leave and other costly benefits aren’t required.
Another benefit to hiring an independent contractor is the increased flexibility and workflow. Independent contractors generally come fully specialized, which means that the learning curve is reduced and the training period is cut down. As labor needs change, independent contractor services can be enlisted and dispensed with as necessary, without the workplace suffering from the low morale associated with employee layoffs.
The downsides to hiring independent contractors include loss of control and subjection to the whims of the market. If the independent contractor’s services are suddenly in higher demand, their rates could go up. An independent contractor is always free to refuse an assignment. There is also the issue of intellectual property. An employer might not necessarily retain intellectual ownership over what the independent contractor produces, as would be the case with an employee. Finally, there is the question of security: independent contractors will work for multiple companies at once, and potentially have access to sensitive or proprietary information from each. While it would unethical for them to disclose secrets to competitors, there is no guarantee that it won’t happen.
The pros of hiring employees rather than independent contractors include loyalty, growth potential and multitasking abilities. Bringing an employee on board means making an investment, and this investment can be rewarded with devoted, long-term service. While an independent contractor usually specializes in one task, an employee can be familiarized with the complexities of an individual business and take on multiple responsibilities. Employees are also able to take on managerial roles and supervise further staff, helping to build a more organized structure.