Whether or not to hire employees is one of the major questions that small business owners must face. A common alternative to staff is to hire contractors to handle some of the work. Both systems have their advantages and disadvantages, and it primarily depends on what type of task must be completed.
When to Hire Contractors
Contractors are best for short-term, seasonal, or scalable working environments. There is no expectation of a long-term relationship past the completion of the contract. The most obvious choice is when someone is needed for a short-term project. It would not be worthwhile to hire an employee, train them and then pay unemployment when the project is done. However, more and more companies are hiring contractors and freelancers over employees when it comes to day-to-day tasks. This keeps the company from needing to pay a full workforce even when business is light.
In situations where the company is concerned about liability and labor laws, they should hire a contractor. When working with an employee, the business is required by law to pay at least a minimum wage, as well as any overtime as required. There are also no requirements to allow time off for sick family or to allow them to work together in a union. Since the contractor is considered a completely separate business, it is the contractor’s responsibility to ensure they are getting paid fairly for their work. This means that pay, hours, and time off must be negotiated as part of the contract.
While there is a certain lack of control when it comes to contractors, this is not always a bad thing. Since a contractor is generally an expert in their field, they will often work more efficiently and with less supervision than an employee would. While it is possible to hire an experienced employee, they will usually expect a certain level of training along with the position. It also offers the small business the opportunity to expand and contract its pool of talent quickly, as well as accessing professionals that they could not afford to hire for regular employment.
When to Hire Employees
When it comes to a consistent, steady position, hiring an employee is often the better choice. While employees are often more expensive in the long run, the terms of employment are more strict. By definition, an employee is trained by a business and takes its instructions only from that business. A small business that needs someone onsite to handle shipping or assisting customers will not only need to hire an employee from a legal perspective, but that additional control will also assist in ensuring that tasks are handled according to company guidelines.
If a job requires complete control by the company, hiring an employee may be the better option. Contractors are required to fulfill their contract, and may not always perform the work in the manner desired by the hiring company. In fact, a business that exerts too much control over a contractor risks having to reclassify them as an employee. That also means that a small business cannot simply fire a contractor that is simply fulfilling the terms of their contract, regardless of the reasons they may have.
The choice whether to hire an employee or a contractor can be a difficult one. There are strong advantages to working with people in both column A and column B. While experience will be one guide for the decision, looking critically at the requirements for the position as well as the legal ramifications can usually put the job squarely in one column or another. As a small business continues to grow, it will likely use a combination of people who work under both titles.