As an entrepreneur with your own start up, there will come a point where you need to invest in some extra help to get things done. The move from solopreneur to employer only means your venture is successful and is growing.
The question that comes in next is whether to consider a full time employee or a contractor. Prior to making this crucial decision it is important to consider some things.
Nature of the Work
There are some types of jobs that are well suited to contractors while others leave no choice but to hire an employee. Jobs that are confidential in nature or those that have require a high level of privacy would be well suited to an employee. Contractor jobs are more suited to a specific job such as blogging, web design and the like. Freelancers are going to be readily available for such positions.
Breadth of the work
There are a lot of questions here to ask yourself. How much work is going to be done? How long will the work be done for? Is it a singular project for an expected long term or is it a single one for a short while or maybe even several project over either a month or a few months. Is the work going to require knowledge of the company, customers? How much control do they have? The answers to this question should give you a clear choice over whether to opt for a contractor or an employee.
Array of your demands
One should put into consideration the diversity of their needs. The variation of the work obligations could determine whether to opt for an employee or to go for contractors. Suppose you require a person familiar with web design, customer service and accounting, it would be quite difficult to find one employee with this cluster of skills. So it is better for the company long term to have three contractors who would be able to do this work at the cost of one employee.
Budgetary allocations
The budget you have set will also be a determining factor as to whether you go for a contractor or a full time employee. With an employee we have to worry about benefits, insurance and other benefits while with a contractor, this costs do not come into play. However with the contractor position uncertainty is to be considered so it is essentially about weighing the risk.
Season
There are businesses that operate on a season basis where they are really busy over a period then really slow at other times. Such businesses like online retail stores have a peak during holidays such as Christmas then slow down later. In such a case then contractors would be a friendlier choice for the business because it does not tie the business down to an employee salary.
Investment
The time and resources spent on finding a suitable employee are extensive. So hiring a contractor will come in handy and save time and money. You save on training well. If the contractor does not perform according to set standards then it’s easier to cut ties and find a new person.
PROS OF CONTRACTORS |
CONS OF CONTRACTORS |
| Depending on your need the amount of work can vary | Control is limited according to the project. |
| They are cost effective | Projects of higher budgets cost will take priority |
| Investment in terms of training, recruitment and such costs is reduced | Dedication to the company and its growth may be lacking. |
PROS OF AN EMPLOYEE |
CONS OF AN EMPLOYEE |
| Will be invested in the company’s success | During seasonal lull the person is still on the payroll |
| Delegation of tasks can be done permanently | Costs of benefits such as vacation time etc. |
| Will be more aware of the intricacies of the business | Taxes and payrolls will create an additional cost. |
Clearly choosing between the two is a difficult task. While it can be tempting to choose contractors over employees because of the overall savings financially, it is quite risky since you may actually hamper business growth. An employee committed to the business will only enhance it in terms of development and they can be trusted with crucial information. However contractors do fit in with a budget for a start-up company.
The other option would be to hire both sets for different categories or for the specific tasks required. This is a tempting offer but a precarious one. There will be different classification of workers and as such it will create tax implications that the IRS is rigorous with. In the event of an audit, a misrepresentation of a workers status could result in serious ramifications.
Given this information, making a decision on how to hire should be easier. A lot of the companies start of people with contracts as they asses their competency level and eventually have an on-job-training on certain tasks then proceed to take them on as employees who can handle various fields. To get some work off your plate then get hiring whichever category you please.
