Hiring a contractor instead of a full-time employee may save you time and money. Here are some benefits and disadvantages of using independent contractors:
Short-term workers for short-term projects
You don’t always have to hire a permanent employee for every role. If your small business needs someone with specific skills for a short-term project, it could make sense to hire a contractor instead.
Contractors are not part of your permanent workforce. They aren’t your employees. They are one-person businesses who work for organizations for a short period of time. Whether it’s for a couple of weeks or a few months, hiring a contractor could help your small business to grow in a more flexible way.
But contractors aren’t suitable for every role. Here are some important points to consider before you decide whether hiring a contractor is the right move for you.
What defines a contractor?
A contractor is someone who works for you on a short-term basis, usually on a project. They utilize their own materials and equipment.
Contractors are sometimes referred to as freelance workers or consultants and work on a contract basis.
The most important thing to remember is that a contractor is not an employee. Contractors are independent businesses working for you, sometimes on your premises.
If you treat them as employees, you run the risk of losing money through unnecessarily paying payroll taxes. So always follow local, legal guidelines to make sure you get this right. Some criteria that the government looks at to determine contractor status is:
- Must own at least part of your own business
- Work for multiple companies during the year
- Have specialized skills
- Does work for a client who ultimately makes the decisions on the projects