Maximizing your scarce resources is a key function of the entrepreneur. Using independent contractors is one way to manage your people costs without the commitment and cost of a full time employee. Independent contractors give you the flexibility to respond quickly and not to make the more significant commitment required for a full-time employee. But with these benefits come some risks. Here are some of the advantages and disadvantages of employees versus independent contractors.

“Maximizing your scarce resources is a key function of the entrepreneur.”ย 

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Full Time Employees

Advantages: When you hire full time employees, they will work for you thirty or more hours a week (fewer hours makes them part-time) and will usually have a long-term commitment to you and your business. The advantages to this type of relationship for you, the employer, are:

  • These employees will feel pride in their position in your company. Most people want the security of a job, but they also want to feel the satisfaction of working for a company that they can call home. They want to feel that they are an important part of the team. If you give them that, they may go the extra mile.
  • You donโ€™t need to scramble to find help when your workload increases. If you only rely on independent contractors and need urgent help, your favorite freelancer might be booked. Or it might cost you a lot more to hire one last minute.

Disadvantages.ย As you consider whether you want to hire full time employees, youโ€™ll need to consider the downside as well. There are certain requirements that come with having employees:

  • Although it isnโ€™t mandatory, most full time employees expect benefits, like health care and vacation time. As you interview potential candidates, they will most likely be interviewing with other companies as well, who offer such benefits.
  • Youโ€™ll have specific payroll paperwork that is legally required. Along with this, youโ€™ll need to withhold your employeesโ€™ taxes, social security, and Medicare.

Independent Contractors

Advantages: Small business owners usually prefer to hire freelance workers for jobs when they need help. There are distinct advantages to sticking only to independent contractors:

  • Although you usually pay more per job or per hour, you will most likely save money overall since you arenโ€™t required to pay them any benefits and do not need to commit to a salary.
  • They are responsible for their own permits and professional licenses.

Disadvantages: While hiring independent contractors has many advantages, there are some drawbacks as well:

  • You lose some control over how tasks are preformed, because you canโ€™t closely monitor their work. You can guide them, but usually they arenโ€™t on site and will run their business their way.
  • They have no sense of company loyalty, but are a hired gun for one specific job. They are not part of your staff.

Using independent contractors as a business grows can help an organization bring in capabilities that it doesn’t have in a manner that can be cost-effective and efficient. At the very least, you should consider it in connection with your resource needs as you grow.

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