Contractors Versus In House Staff – Which to Choose?

If your business is growing and you feel it’s time to add extra staff, how do you choose between hiring new employees and using skilled contractors? There are pros and cons to both options and businesses should choose the best option to suit their unique circumstances. This topic can prove to be a major roadblock for some Businesses. Confused people do nothing, and many times we opt to just trying to do it ourselves.

Advantages to hiring full time employees

  • They 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.
  • The hourly wage for a full time employee is often much less, because they have job security. If you were to hire out for the same work with a freelancer, you can often expect to pay quite a bit more.
  • You don’t need to scramble to find help when your workload increases. If you only rely on independent contractors and need urgent help, your favourite freelancer might be booked. Or it might cost you a lot more to hire one last minute.
  • You don’t have to wear all the hats of your business yourself. Instead you can delegate tasks permanently to others. This frees up your time to do the tasks best suited for you.
  • You don’t need to continually train staff on how you like things done. Your employees know you and can do the work without the need for continual direction.
  • If you want to take a vacation, you can be assured that someone is holding down the fort for you in your absence.

Disadvantages to hiring full time employees

  • You’ll need to pay their salaries like clockwork, even if your business has a lull. In order to cover their wage, you’ll need to have a reserve of money in your bank account.
  • You’ll have specific payroll paperwork that is legally required. Along with this, you’ll need to withhold your employees’ taxes and superannuation.
  • You are responsible for your employees’ training and professional licensing requirements. These vary from state to state.

Advantages of hiring independent contractors

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 aren’t required to pay them any benefits and do not need to commit to a salary.
  • You have greater flexibility. When you work with an independent contractor and it isn’t a good match, you simply don’t hire them again. When you have an employee that doesn’t work out, you may need to fire them, which isn’t always easy.
  • You can hire the right person for the task needed, contracting someone with a specialised service. They often have many years of experience, so you don’t need to train them.
  • They are responsible for their own permits and professional licenses.

Disadvantages of hiring independent contractors

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

  • You lose some control over how tasks are preformed, because you can’t closely monitor their work. You can guide them, but usually they aren’t on site and will run their business their way.
  • They are hired short term, so you might not get the same worker for the next project. They usually operate on a first term, first serve basis.
  • They have no sense of company loyalty, but are a hired gun for one specific job. They are not part of your staff.
  • They will not promote your brand, but their own. Their work is done under their business name, with their logos, etc.
  • All copyrights will be owned by the independent contractor, unless you draft an agreement stating otherwise.

When hiring employees, you have more options than you may realise. Not every position needs to be in office, full time or part time. In some cases, outsourcing some of your staff may give your business exactly what it needs. But before you start planning your outsourcing strategy, you should think about what positions you need to fill, and what kinds of jobs are typically outsourced. Often they are customer service, marketing and social media management, sales (through contractors), and IT systems (via the cloud).

For some types of businesses, like retail stores and restaurants, working with freelancers is not really an option, at least for your primary employees like floor salespeople, waiters, and cooks. Full time employees may also be better able to jump in and take care of a variety of different tasks as they arise.  This is in contrast to independent contractors who are generally hired for very well defined tasks. Finally, while not impossible with independent contractors, teambuilding and getting people to work together as a tight nit group is generally much easier with full time employees.

Whether opting for employees or contractors, employers must select the option that will best fit the requirements of the role, the company culture and the longer term plans of their business.

Author:
Sally Hams

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Email: accounts@balancebooks.com.au

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