Benefits of Hiring Contractors vs. Full-Time Employees

Whether you’re hiring for a new project or looking for ways to streamline your current workflows, there are many factors that go into selecting workers for your business. What type of culture do you want to build? Do you have a long-term plan in place, or will the job be temporary? Where is the best place to find qualified candidates?

These questions lead to one of the ultimate hiring questions: do you hire an employee or independent contractor? There are benefits and drawbacks to both, so it’s never a good idea to make a hasty decision. This article discusses the benefits of both independent contractors and employees so you can weigh your options and make the best decision for your business.

The Benefits of Hiring Independent Contractors

Independent contractors are self-employed individuals who provide services to clients without being directly employed by the client. The IRS states that, “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

As independent contractors continue to grow in popularity, it’s important to note that hiring a worker as an independent contractor is only allowed in certain cases. The worker must fit the legal precedent for being an independent contractor. Misclassifying employees can lead to hefty fines, legal fees, and back taxes. If you aren’t certain whether you’re hiring an independent contractor or employee, check out our recent guide here.

There are many instances in which hiring independent contractors will serve you better than employees. Let’s take a look at some of the benefits:

  • Flexibility – Hiring independent contractors is a great way to stay flexible, save money, and reduce your administrative workload. On top of this, hiring independent contractors allows you to add new workers when needed without going through a lengthy employment process like with regular employees. Hiring contractors allows you to scale up and down as needed.
  • Less Management – When you hire an independent contractor, they’re responsible for all of their own expenses such as equipment and supplies. That means that you don’t have to help them with these expenses or the storage of their equipment. Since contractors work independently by definition, you don’t need to spend as much managing your contingent workforce as you do employees.
  • Expertise – When you’re hiring someone who does contract work professionally, you are getting someone with vast knowledge and expertise from a wide range of experiences. Additionally, as the gig economy explodes, more top tier professionals are seeking contract work, and this increases your odds of finding an excellent contractor.
  • Less Liability – Contractors are not entitled to paid time off, retirement plans, or other benefits that come with full-time employment. They also pay their own Self-Employment Tax which means you are not liable for any payroll tax on top of what you pay them for the project. 

In light of these great benefits, there are still risks involved with hiring independent contractors. You risk how loyal they are to your company, and you risk potentially having to find someone new if they have another contract come up. 

If you’re only looking to hire contract workers to save money, it’s important to note that since independent contractors are responsible for paying Self-Employment Tax, you may end up paying them more per hour or per project than you would an employee. In the long term, you may not end up saving any money because of it.

The Benefits of Hiring Full-Time Employees

With the increasing trends in freelancing and remote working, you might think that hiring full-time employees has become a thing of the past. But despite what many people think, there are still plenty of benefits to having your own full-time staff.

The IRS states that a worker is an employee if: “You can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.”

A traditional employee can be a great way to handle your workload, here are some of the benefits:

  • Commitment – Full-time employees will likely have a higher level of commitment and loyalty than part-time or contract workers. If you want someone to stick around so you’re not constantly training people, hire an employee.
  • Control –  An employee is more likely to follow your schedule and do what you say. You are able to create their work day from start to finish, control when they work, and tell them how the work needs to be completed.
  • Training – You can train full-time employees to do tasks that are completely specific to your business. You are able to turn them into the perfect worker for your business by investing in their skills and understanding of the needs of your business.
  • Community – Employees create company culture; when you hire employees you’ll get long-lasting relationships and camaraderie. These are vital for the success of a business. Hiring employees means you have people who want the same thing you do: the long-term success of the business.

Full-time employment gives many people a sense of security, but this security comes at a cost. In addition to having to provide an employee with benefits like health insurance and PTO, you must also account for payroll taxes. 

How to Get the Benefits of Both

If you’re looking for the best of both worlds, consider using an Employer of Record like GreenLight. You can get all of the benefits of hiring a contractor without having to worry about the risks. We handle payroll, benefits, risk mitigation, and compliance so that you have more time to focus on your bottom line.

Schedule a call with our team of experts today so you can make sure you’re getting all of the benefits available to you when you’re hiring.

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Alex Steeno

Alex Steeno

Senior industry analyst, adviser of multiple hypergrowth agencies, SaaS, and tech-enabled service platforms, Alex Steeno regularly contributes insights related to industry trends, growth marketing, and management consulting.

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