Employee vs. Contractor


Which role suits which type of hire?

Your small business is growing rapidly, and its demands are beyond what your team is capable of. As a company founder, you face an important decision: should you hire a full-time employee or hire an independent contractor?

Both employees and contractors have advantages and disadvantages for your small business. Each type of hire plays a different role in your company, and when used in the right way, employees and contractors complement each other very effectively.

Choosing whether to hire an employee vs. a contractor, however, often isn’t a simple process. When your company’s resources limited, do you choose the affordability of a contractor or invest in the professional loyalty of a full-time employee?

In this blog post, we’ll provide detailed information on when to hire an employee for your business and when to hire a contractor based on the type of job you’re looking to fill, the complexity of the position and your company’s long-term growth goals.

When should you hire a full-time employee?

Firstly, not all businesses can hire contractors at all. If you run a retail company, for example, and need to fill your sales floor with qualified people, you’ll struggle to find contractors interested in filling the position.

Employees offer numerous advantages over contractors. These include the ability of the employee to grow with your company and move from their current role into one with greater responsibilities and involvement as the company developments.

Hiring employees often gives your company security and assurance, particularly if a role requires confidentiality. Company assets like trade secrets, internal strategies or specific product information are sensitive and often highly valuable.

Your company’s aggregate internal knowledge and skills – the skills of its employees – is also an asset. Hiring full-time employees adds to your company’s value and gives it a competitive advantage that allows its growth and development to continue.

Because of this, you should hire a full-time employee for any role that you think has the potential to evolve into something bigger in the future. You should also hire full-time employees when team cohesion and group development is important.

Employees are a bigger commitment for your company than contractors, but they’re also often a bigger asset. Making an investment in high quality employees can result in huge benefits over the long term, particularly as your company grows.

When should you hire an independent contractor?

Just like employees offer specific advantages over contractors when it comes to your company’s aggregate internal knowledge and loyalty, contractors often have unique advantages for your businesses that full-time employees don’t have.

Some of the biggest advantages of contractors include their relative cost, both when it comes to wages and when it comes to tax savings, the lack of having to pay for full insurance and benefits and the legal protection your company benefits from.

Contractors also offer flexibility when it comes to filling specific roles that require a certain skillset. If your small business needs marketing help but can’t afford to hire a full-time marketing manager, an expert contractor can temporarily fill the role.

Generally speaking, the best time to hire an independent contractor is when you’re filling a specific, clearly defined role. If the task you need completed can be defined specifically and its needs explained in real terms, a contractor is a good choice.

Contractors are also the best choice if your company has limited resources and only needs to fill a part-time role. The most capable professionals generally won’t take on part-time work, whereas highly skilled independent contractors often will.

Which is a better choice: employee or contractor?

Both employees and contractors have different advantages and disadvantages for your business, and neither is “better” than the other all of the time. However, for a specific role or situation, a full-time employee or contractor may be a better choice.

The best businesses hire strategically based on their goals. If you want to build an exceptionally tight-knit team, you’ll struggle to do so with contractors. If you can’t afford to pay a full-time salary, you’ll struggle to attract great employees.

Focus on your company’s goals and strengths when choosing how to hire and you’ll make the best decisions for your company’s continued development, whether that means taking on full-time employees or working with independent contractors.