Independent contractors and employees are two very distinct types of workers. Employees typically want to go to work for one employer and have that employer take care of the various aspects of running the business. Independent contractors usually work for multiple employers, accept responsibility for all aspects of their businesses, understand the challenges of business ownership, and are more likely to operate with a strategic partnership mentality.
Employees are great for the day-to-day operations, where independent contractors are often best for limited assignments. Both of them will cost you, especially if you don’t spend time setting clear expectations and maintaining the relationships.
Advantages of Working with Independent Contractors
- You are doing business with another business owner, which suggests that you can delegate projects with high performance expectations.
- You do not have to withhold payroll taxes or provide disability, family medical leave, paid family leave, unemployment, or workers’ compensation benefits.
- You might be further insulated from liability for work performed, as the contractor might have its own business insurance.
- You can negotiate terms of the relationship and enforce them more freely under Contract Law.
- You can create more favorable payment terms and more easily restrict them from competing with you.
Disadvantages of Working with Independent Contractors
- You do not have much control over the way work is performed or when it is performed. Typically, your client and the contractor will have more control over these.
- You could be liable for injuries to the contractor’s employees, if the contractor has misclassified them or otherwise failed to provide workers’ compensation insurance.
- You must still ensure your employees are free from sexual harassment in the workplace, and this includes by contractors and their employees.
Advantages of Hiring Employees
- You can hire for attitude and give them the skills you need them to have. When you hire a contractor, you are likely hiring an expert who will tell you how the work will be performed—and who will likely command higher pay.
- You can cultivate them and celebrate their advancement, whether with your business or as they move on to higher education and other opportunities.
- You have more control over their performance and the term of the employment, unless you entered a contract that limited the employment-at-will relationship.
Disadvantages of Hiring Employees
- You will likely have to invest more time in training and cultivating them.
- You have more responsibility for their performance, earnings, benefits, and errors.
- You will often take on their personal issues, as well as their work-related ones, because you will probably spend more time with them, their moods will have greater impact on your entire workforce, and their work product will be attributed to your business, where poor quality work by a contractor will be more likely attributed to the contractor’s business.
This post gives a general overview of some worker classifications. It is not legal advice, and there is certainly no guarantee that any of the actions detailed above will generate a similar or specific result. Past success is never a guarantee of a future outcome. If you require information or advice applied to your unique situation, please consult counsel in each of the jurisdictions where you pay workers.
Need to reclassify some workers?
Nance L. Schick, Esq., is a workplace attorney, ethno-religious mediator, and conflict resolution coach based in New York City. Her goal is to keep managers and small business owners out of court and build their conflict resolution skills so everyone has a better work experience. She is creator of the Third Ear Conflict Resolution process, author of DIY Conflict Resolution, and an award-winning entrepreneur acknowledged by Super Lawyers (ADR, 2018, 2019 & 2020), the New York Economic Development Corporation/B-Labs (Finalist, Best for NYC 2015 & 2016), U.S. Chamber of Commerce (2015 Blue Ribbon Small Business), Enterprising Women Magazine (Honorable Mention, 2014 Woman of the Year awards).