Hiring Employees vs. Contractors in 2023

Hiring Employees vs. Contractors 2023

You desperately want to save money, so you’re unsure about hiring a full-time employee.

On the flip side, hiring contractors seems cheaper and simpler, but they might not be as committed in the long term.

Then you think about your employment strategy — and are torn between engaging employees — or hiring contractors. 

Hiring contractors appears cost-effective, simple, and straightforward. You don’t have to worry about filing a plethora of returns or paying damages for wrongful dismissal. 

On the other hand, by engaging employees, you can build a shared company culture whose attendant positive energy can help spur productivity.

Here’s the thing. While the decision to hire employees vs. contractors is a difficult one and often depends on the specific role, the following factors should help you make a decision.

But first—

Who Is Considered a Contractor? 

A contractor is an individual or organization hired to provide a specified service for a stated period and according to the terms of the contract. 

If you want to engage a contractor, both of you must agree on the terms of the contract beforehand. Some of these include—

  • The task the contractor is to perform
  • Details about the contractor’s compensation, whether according to a specified milestone or at the completion of the task.
  • The duration of the project, and
  • The expectations from both the contractor and the client.

Finally, a contractor can also be called a freelancer or a consultant. 

Who Is Considered an Employee?

An employee is a worker who’s on the payroll of a specific company, and hence, 

  • receives periodic wages, 
  • benefits from training and professional development programs put in place by the company, and 
  • gets paid time-off.

When To Prefer Contractors vs. Employees

According to LinkedIn’s Future of Recruiting report, while the share of job posts for contractor roles increased by 26% for a seven-month period in 2022, that of full-time roles rose by a measly 6%.

The following are some reasons employers are increasingly preferring contractor roles.

Hiring Contractors Can Help Your Business Save on Costs

While contractors can be expensive, depending on experience and the set of skills you are considering, in most cases, contractors are way cheaper than employees. 

This is because — unlike contractors — hiring employees entails paying for employee benefits such as health insurance, retirement benefits (including 401 (k) plans), and paid vacation time. And this is not a trifle. Expenses related to staff benefits can increase hiring costs by up to 50%.

Besides, if you hire a contractor, you’ll often save on costs related to buying new equipment, such as laptops, renting office space, and conducting costly staff training and development programs.

Hiring Contractors Gives Companies Much-Needed Flexibility

As a business, you will want some degree of flexibility. This may come in the shape of hiring a worker only when you need a specific service — and the ease of terminating an engagement when circumstances require. You can achieve this kind of flexibility only if you hire a contractor.

You may already know that full-time employees are often more protected — and subject to a complex network of protective actors. These include labor laws, worker unions, and individual employment contracts.

Hiring Contractors Can Give You Access to Special Skills

Since most businesses need highly specialized skills only for a short period, a contractor arrangement may work better than hiring a full-time employee.

For instance, an employer may need someone with graphic design skills only for a particular marketing campaign.

Then again, increasingly more skilled workers prefer the flexibility that comes with contract jobs. Therefore, you may struggle to get one if you insist on a full-time employee arrangement.

That said, there are instances you’ll prefer hiring a full-time employee to engaging a contractor.

Hiring Employees vs. Contractors Ohio

When To Prefer a Contractor To an Employee

Sometimes, depending on your circumstances, hiring a full-time employee will make more sense.

Here’s why.

Hiring Employees Can Ensure Loyalty 

Regardless of the business you’re running, employee loyalty can be a huge factor. Besides inculcating a sense of stability and trust, studies have shown that loyal employees are often more engaged and productive — and will work more to make the company successful.

Since full-time employees often see their future as bound with that of the company, they tend to be more loyal than temporary contractors.

Of course, as a business, you need some level of employee loyalty — and the attendant stability. No company wants to be recruiting every other month or week.

Hiring Employees Can Help Protect Crucial Information 

If your business is vulnerable to security breaches, or you don’t want some information to leak out, hiring a full-time employee will make sense. But this depends on the business you’re doing — and your circumstances.

Need More Help Determining Employees vs. Contractors? 

Here’s a simple guide: 

You may want to hire an employee if—

  • The task requires close supervision
  • The role requires a close relationship with co-workers and clients.
  • You’re concerned about the likelihood of information leakage or security breaches.
  • The role requires a long-term commitment.

On the flip side, you may want to hire a contractor if—

  • The need for the role is temporary
  • You want to save costs by not paying employee benefits.
  • The role requires specialized skill
  • You put a premium on flexibility.

As an overall business strategy, however, you may need a blend of the two approaches while considering the needs of your business. Just ensure you don’t misclassify a worker — as this can come with a hefty penalty. There are state-to-state legal requirements as well.

Finally, if you need help making this decision, let’s chat.  

Whether your business is just starting out, growing, or preparing for exit, our friendly team is here to help. 

Simply book a free consultation with one of our team members by using the link here.

Until next time!

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