Employee Versus Independent Contractor

As a business owner, you’ve got some big decisions on your plate to make. If you’ve got a threshold of employees, you may be looking at the impact of the Affordable Care Act right now. You’ve got more than just salaries to consider too, what with sick days, vacation days, and other fringe benefits that employees enjoy beyond just health care. Hiring independent contractors who work for a set wage seems to make sense, right?

Maybe not. Let’s take a look at the difference in classification.

You Can’t Tell Independent Contractors How To Work

The main issue that employers find when hiring independent contractors is that they don’t like the process of work that comes in from the contractor. This causes the employer to begin dictating how work should be done, how to improve the quality of work, and often leads to corrective action on the contractor when the work isn’t done according to a “correct process.” Although you can reject work that doesn’t meet specs, according to employment law you can’t tell an independent contractor how to make the work meet specs.

In fact, when you do, that changes an independent contractor’s status from a contractor to an employee. Once that occurs, in the eyes of employment law, you would then owe that person the same benefits other employees have. This is even if you have a signed agreement that the person is an independent contractor. By dictating terms, courts have often ruled that the employer changes the terms of the contracting agreement.

Are Employees Better To Hire?

Not in every circumstance, no. If you have confidence in an independent contractor to get the job done, then let them work independently and provide you with results! By doing so, you can often get the work done for up to 50% less than you would with a full-time employee doing the work. If, however, you need more control over the process to get the desired outcome, that takes the independent nature of the work away and that means you’re better off hiring an employee instead.

How do you find good independent contractors upon whom you can rely? You’ll need to vet your potential contractors just as you would vet your potential new hires for an open position. Meet with a potential contractor, get samples of their work, and get a clear idea of how they would approach your project before you hire them so you know what to expect. You can always be surprised by a contractor and there’s ultimately less overall control with one, but you could save a lot in the long-term with one as well.

Is an Employee or Independent Contractor Right For Me?

For many small jobs that you only need to have completed once, an independent contractor might be the right resource to have. For larger jobs that require input from you or your organization to successfully complete, you’ll want to hire an employee to avoid an uncomfortable conversation at best and litigation for additional compensation at worst. Consider the job, what your needs are, and then find the right person to meet those needs.