Should You Hire an Employee or Reach Out to a Freelance Contractor?

by Thom Tracy

2 min read

If you’re overwhelmed by the demands of your small business and are considering bringing on some help, that probably means that your business is growing. You could add either a full-time employee or an independent contractor to help fill the gap, but figuring out which is a better choice depends on your specific situation. Ask yourself these questions before hiring.

Do You Expect Steady or Fluctuating Demand?

Is your business experiencing a growth in demand that will require attention throughout all months of the year or just a few? For example, if you’re an accountant, do you need just help around tax time? Are you looking to complete a project that has a specific start and end date?

Short-term needs are best handled by contractors. You can bring them on and let them go quickly, and hiring contractors doesn’t require lengthy paperwork hassles and recruiting processes. Contractors are very flexible, and you can make changes quickly if your business’s needs change.

If you expect a long-term, steady increase in demand, you might be better off with an employee. The employees you hire eventually become more familiar with the ins and outs of your company, and they build loyalty over time.

Do You Seek a Special Skill Set?

If you’re looking to take on a project such as a major accounting system upgrade, you may not have someone on staff already that is experienced or equipped for that type of job. In that case, a freelance contractor might be the better choice. Small businesses typically have few employees and don’t have the scale to take advantage of a broad assortment of skills and abilities. Bringing in a contractor allows you to choose an individual who specializes in exactly what your business needs without needing to make a long-term commitment.

A contractor may also make more sense if you’re looking to test an expansion of your business’s services. You don’t want to commit to an idea without testing its viability first. Hiring a short-term contractor gives you the ability to test your product or service for only a finite amount of time. If it doesn’t work, you can let your contractor go without hassle.

Is Cost an Issue?

Employees and contractors both have benefits and drawbacks when it comes to cost. Contractors usually come at a higher hourly rate than what you would pay for a full-time employee’s salary. However, you don’t want to make a hiring choice just based on the hourly rate. Full-time employees often require benefits, insurance coverage, retirement plan matching contributions and vacation time, which you must factor in before deciding to hire employees. Benefits could add more than 25% to the cost of the salary alone. Contractors don’t get those benefits; calculate a total cost for both types of workers before making a final decision.

References & Resources

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