Running a business on your own is a lot of fun, but can only work to a certain point. There may come a time where you need help with some tasks. Needing help in your business should be celebrated. It means the business is seeing so much success that you cannot run it alone!
There’s two very common ways to acquire help for your business. You have the option of hiring independent contractors vs employees. Obviously there’s pros and cons to both. Below, we break down some of the key differences between the two.
Hiring Employees
Long-Term Relationships
Building long-term relationships with employees is important. Getting to know them on a personal level will help keep them happy and motivated to come into work every day. Gaining a better understanding of how they work in a professional environment will allow you to provide the right tools and resources they need to succeed.
Stability
Employees provide a sense of stability in your business. By having someone locked in to your team, you don’t have to continuously worry about looking for new talent.
Employees don’t have to be booked ahead of time either. You know exactly when they’ll be available and for how long. You should have access to them during whatever time period you set out in your contract, most likely 9am – 5pm. As a business owner you can plan projects ahead of time with ease knowing that they’ll be available for work.
Consistency
You know exactly what to expect from someone when you work with them on a daily basis. Quality, process, and time to deliver, typically don’t change too much when working with an employee.
Communication and work styles don’t change either. Once you establish how an employee likes to be communicated with, you can stick to that communication style for as long as they stay on with your company. They might prefer live communication over the phone or Zoom. Or they might be more interested in async communication like email or Slack.
When you’re working with the same employee, these things typically don’t change, so you can keep things consistent.
Employee Entitlements
There are many legalities you must take into consideration when hiring an employee. In most places, employees are entitled to vacation pay, statutory holidays, minimum wage, and overtime pay.
Hiring an employee is definitely not cheap. Preparing paperwork and taking care of the legal aspects can be time consuming.
Salary Deductions
As an employer, you must withhold funds for taxes, pensions, employment insurance and benefits. Your employee is not responsible for these items.
Again, this is something that can be time consuming unless you have someone on your team, preferably an accountant, that can handle these tasks.
Competitive
Employees may work for your company at the moment, but they still have the freedom to leave and join another company.
That’s why it’s important to keep up with competitive pay rates, benefit packages, and work environments. If your employer sees that the grass may be greener on the other side, they have every right to leave.
Hiring Independent Contractors
Short-Term Relationships
There’s no need to invest a lot of time and energy into finding out how an independent contractor works best, or how they prefer to communicate. Independent contractors are used to working in different environments so they should be more than willing and able to adapt to your preferences.
It’s much easier to find an independent contractor for your business because you’re typically hiring one to accomplish a task or project. You’re not bringing them on to help you strategize and grow the company.
You can terminate a contract with an independent contractor whenever you’d like with any notice or severance package. Just be sure to outline this in the contract.
No Employment Entitlements
Independent contractors are not entitled to vacation pay, statutory holiday pay, or overtime pay. They can take vacations whenever they’d like, but you as a company are not required to continue to pay them.
You are not required to pay them the minimum wage if their rate is lower than that. They are also required to pay for any equipment that may be needed to complete a task or project. Again, just be sure to outline this in the contract.
No Salary Deductions
As an employer, you are not required to withhold taxes, pensions, employment insurance or benefits for independent contractors. They will be responsible for handling these items on their own.
Hiring Independent Contractors vs Employees Depends On The Needs Of Your Business
There’s obvious pros and cons to both options. But sometimes you have no choice but to pick one that best suits the needs of your business at the moment.
If you need someone for one task or project, even if it’s recurring, hiring an independent contractor might be the right choice. If you need someone by your side every day for core business activities then hiring an employee might be your best bet.
Independent contractors come with more flexibility and freedom, but employees come with more stability and consistency.
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