There are many things that must be considered before deciding whether to use independent contractors (ICs) to staff your business. It is important to ensure that audits can be passed at both state and federal levels. The biggest advantage to independent contractors is saving money. These advantages and disadvantages of hiring independent contractors can make a big difference in how your business functions.
Saving Money with Independent Contractors
Companies sometimes pay independent contractors more than employees, but they are not providing them with benefits or office space. Contractors usually supply their own equipment. ICs cannot form a union, and you are not required to pay the same taxes or contributions as employees. Average payroll costs are reduced up to 30 percent or more by hiring an IC.
Flexibility in Staffing
The efficiency of jobs can be increased by having someone who specializes in the job that you need to be done. Independent contractors can be hired or let go at any time depending on the workload. ICs can be hired to do a specific job or project and only for the duration of what they were hired for. This helps prevent firing and laying off workers.
Lessened Risk of Lawsuits
Independent contractors are business owners, meaning they cannot make the same legal claims as employees. There is no requirement to pay an IC minimum wage or offer benefits and overtime.
Disadvantages to Hiring Independent Contractors
Independent contractors cannot be overseen as closely as employees or you risk making them look like employees and having to provide them with the same benefits. The staff of your company will change often since Independent contractors are typically hired for short-term projects.
Written Agreements and Liabilities
Firing an Independent contractor is dependent on the contract you have with them. Those terms are set out in the agreement. Firing them for a reason not in the agreement is a violation or breach of contract. Workers’ compensation doesn’t cover independent contractors, so you can be held responsible for any injuries they receive while on the job.
Look closely and exam all aspects before hiring an independent contractor.