For a number of reasons, many businesses are hiring temporary or contract workers instead of full time employees. How does someone in charge of hiring decide what’s best for their business? Here are a few ways to figure out whether to hire a contract worker or a full time employee.
Contract Worker vs. Full Time Employee: Things To Keep In Mind
It’s expected that, within just a few years, four out of every ten workers in America will be freelance. That status gives a few advantages to employers, the primary ones having to do with cost and flexibility.
Full time employees nearly always earn less per hour than contractors, with one important difference – full time employees almost always get benefits. Providing full time employees with things like a 401K, health care, Social Security, tax withholdings, and unemployment can cost between 20 and 30 percent more overall than contractors, even with the lower wage.
When considering whether to hire a contract worker or full time employee, another thing to take into account is the type of work you need done. A contractor is a better choice if very little supervision is needed and you aren’t very concerned about how a project is finished. On the other hand, a project requiring close supervision and examination of a work process is something that should be limited to employees. Implementing too many restrictions of that sort on a contractor could result in legal trouble, because the tax man might think you’re trying to avoid paying benefits by mislabeling an employee.
A key benefit to hiring contractor workers is having flexibility over their employment period. You can bring them in to do specific tasks, and let them go when the work is done. The down side is that is contractors won’t feel the sense of loyalty that often comes from full time employees. It’s unlikely that contractors will put in extra effort or go outside of their job description, at least not without being paid. Full time employees will often go above and beyond what is being asked of them because they have a built-in reason to want the company to succeed.
Corporate culture is another thing to think about when debating whether to go with a contract worker vs. full time employee. A high number of contractors means a greater amount of turnover, and establishing consistency in how your company does things can be difficult in all that chaos. It can also mean needing to repeatedly train people to perform similar jobs, which can be a drain on both time and money.
Whichever way you decide to go, make sure that you are honest with how you classify employees. Businesses that classify contractors as full time employees minus benefits (a practice which is becoming more and more common) can face severe penalties. If you have questions about how to classify your workers, you can check the Small Business Administration’s website here for guidelines. The Wages and Hour Division of the department of labor is devoted to finding offenders, and they handed down $74 million in fines in 2015. So remember, not only is being honest the right thing to do, it can also save you a lot of money!