Pros and Cons of Hiring: Employees vs Contractors

The  most valuable asset in a company is not the equipment or investments; it is the employees – the human capital – and most plans to move any business forward start with the employees. Employees are vital to the growth of any organization, big and small. For startups, taking on employees can be a daunting task. You have to worry about compensation not to mention the challenges involved in managing different personalities. However, there comes a time when startup owners must  hire someone to help them with tasks that they can’t handle either due to incompetence or a busy workload. When this time comes, the choice is usually between hiring employees or contractors. While both are viable options, each has its unique pros and cons that you must consider when deciding who to hire. 

Hiring an employee 

Hiring an employee gives you the ability to completely control and direct how, where and when they do their work. You can train the employee in the way you need the job done, and you have few restrictions on the tasks you can assign to them or your ability to fire them without being forced to pay out a contract. The downside of hiring employees is the cost of doing so and the  boatload of laws and regulations that come attached to them. For one, you have to worry about paying salaries at the end of every month. On top of that, you have to pay employee benefits like vacations, paid time off, health insurance, retirement benefits, and  workers comp insurance. You also have to comply with federal and state tax requirements for the employees, which can be a headache. 

Outsourcing to a contractor 

The main reason  why many businesses hire independent contractors is that they offer convenience and flexibility. When you need a job done, you can find a contractor that is specialized in that line of work and if you are not happy with the service, the process of finding a different one is much simpler than hiring and firing employees. Although contractors charge more per hour than employees, you will still save money overall since you are not committed to a salary and you won’t have to pay them any benefits. The disadvantage of working with contractors is that you have little control over how tasks are performed, especially when they work off-site. Since they work for multiple companies, they don’t have a sense of loyalty to your company and might not be available to work for you when you need them most. 

The decision to hire an employee or contractor should be made on a case to case basis. There are times when a contractor is the best option, and other times when hiring a permanent employee is the best option. It is up to you as the business owner to pick the best option that will meet your needs.