In this modern era, employers are increasingly hiring independent contractors instead of full time employees to perform specific tasks. Although states have variances in details concerning how these classifications of workers are distinguished, the U.S. Internal Revenue Service identifies two main areas of difference. Firstly, the relationship between an employer and an independent contractor is temporary and established for a predetermined purpose. Secondly, employers have much more control over permanent employees than they do over independent contractors. Here are some of the advantages and disadvantages of hiring independent contractors so you can decide if this hiring option is right for your company.
Hiring an employee on a permanent basis can be expensive for an employer. You not only need to recruit and train new personnel, but you are also required to pay for a portion of their payroll taxes, including Medicare, Social Security, unemployment insurance at state and federal levels, and possibly workers compensation insurance. In contrast, independent contractors are paid fees for their work, and then it is up to them to handle their own taxes.
Vary Your Workforce
When you hire independent contractors, you are able to have more flexibility in your workforce. If you need someone with specific skills for particular jobs, you can hire independent contractors with the expertise you require. They are generally already trained and have the equipment and supplies they need, so they are ready to get right to work.
Numerous laws protect employees of companies and put you at liability risk for issues concerning unions, minimum wage, overtime, medical leave, and discrimination based on gender, race, religion, national origin, and disabilities. Although there are exceptions, these laws do not generally apply to independent contractors.
Understand the Risks
It is important to be aware of the risks when considering hiring independent contractors. For instance, once you have assigned work to independent contractors, you don’t have much control over how that work is performed unless it is specified in the contract. Additionally, you do not own intellectual property created by independent contractors unless it says so in the contract.
For more advice on working with independent contractors, contact New Horizon Capital Funding.