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Should I hire employees or independent contractors?

Posted by: Advisors Management Group in Tips

Growing a business is exciting and complicated at the same time. When you need to build reliable and professional staff you’ll be faced with a choice. Do you go with employees or independent contractors? 

What is the difference? Is one better than the other? 

It all depends on your current business and your short-term goals. 

Differences Between Employees and Independent Contractors

There are some stark differences between employees and independent contractors. Most of them have to do with how they are paid and how much control/oversight the work requires. 

To help make the decision easier, let’s look at what employees and independent contractors are. 


Employees perform work for the employer, and the employer maintains control over every aspect of this work – when and how it is to be done. 

Employers have the legal right to set specific working hours and to control the details or standards about how the work is to be done. 

When they pay their employees, businesses must take out social security tax, Medicare, and income tax withholdings. 

Employers also provide their employees with the tools they need to do the work required of them. This might include office space, work computers, or company vehicles. 

Types of Employees

Not all employees are salaried full-time workers. There are actually a few different classifications of employees that you might hire. 

  • Full-Time Hourly – These are employees that work more than 35 hours per week and are paid hourly.
  • Full-Time Salaried – Employees that work full-time and are paid a set salary, no matter how many hours they work. 
  • Part-Time – These employees work less than 35 hours per week. They are usually paid per hour. 
  • Seasonal – Employees that are only hired to work for a specific season. You may offer to hire them as full or part-time or let them go after the season ends. 

Independent Contractors

An independent contractor is self-employed. They are different from employees because they perform work for a person with a contracted understanding between them. All the details of the work to be performed are outlined in the contract.  

As an employer, you will have control over the work the independent contractor does for you, but not how it is completed. 

There are differences in how you pay them, too. Independent contractors will send you invoices for their completed work. The company that pays them will not take taxes out of the payments. It is up to the independent contractor to make estimated quarterly payments to the IRS. 

Since they are self-employed, an independent contractor may work for multiple people at one time. 

Examples of Independent Contractors

There are quite a few different career fields that work almost exclusively as independent contractors. Some of the most common examples are: 

  • Real estate agents
  • Copywriters
  • Graphic designers
  • IT professionals 
  • Consultants

Benefits of Hiring Employees

The biggest benefit of hiring employees is that you will have more control over the work they do. If your business is such that you need to establish working hours and the work must be accomplished according to a set of standards, hiring an employee is a better choice. 

Another benefit is exclusivity. You can legally require the employee to only work for you and not a competitor. Some businesses even require their employees to not have any other side gigs or side hustles at all. 

Depending on the scope of the project or work to be completed, it might save you money to hire employees. If the work you are hiring for is ongoing, without an end in sight, the salary of an employee might be more affordable than freelancer fees. 

Finally, when you hire employees, you are building a team of people who take pride in their job and represent your business. This is beneficial for reputation and growth. 

Benefits of Hiring Independent Contractors

One of the biggest benefits of hiring independent contractors is that they require very little supervision and training. This saves you time and money. 

It’s also smarter to hire independent contractors if the work is temporary or the project has an end date. This way, you don’t have to go through a lengthy onboarding process only to have to let them go when it is finished. 

There are also financial benefits of hiring independent contractors. Since you don’t have to pay them benefits and don’t need to commit to a salary, you are only paying for work that is completed. 

You have a lot of flexibility, too. If the independent contractor isn’t working out, all you have to do is not work with them again. If an employee isn’t working out, firing them could be a lengthy process, and you’ll have to go through the effort of interviewing and hiring someone else. 

Should I hire employees or independent contractors? 

When you are trying to decide, you need to look at the scope of the work. How much control do you need? Will you need to set specific hours? Will this project end soon or is it an ongoing one? 

If you need to have the final say in how a project is completed and the hours they work, then you probably need to hire an employee. 

On the other hand, if you have a small project that doesn’t require a lot of oversight and has a clear start and end date, then you might be better off hiring an independent contractor. 

Speak to a Financial Advisor 

It is always best to speak to an experienced financial advisor when you are trying to make a financial decision that affects your business. They will be able to look at your goals, the demands of the job, and help you make an informed decision that will help your company grow.

Advisors Management Group is here to help. Contact our Business Consultant today and get started on a plan that works for you.

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