Independent contractors and employees are two very distinct types of workers. Employees typically want to go to work for one employer and have that employer take care of the various aspects of running a business. Independent contractors usually work for multiple employers, accept responsibility for all aspects of their businesses, understand the challenges of business ownership, and are more likely to operate with a strategic partnership mentality. Employees are great for the day-to-day operations, where independent contractors are often best for limited assignments. Both of them will cost you, especially if you don’t spend time setting clear expectations and maintaining the relationships.
Advantages of Working with Independent Contractors
- You are doing business with another business owner, which suggests that you can delegate projects with high performance expectations.
- You do not have to withhold payroll taxes or provide disability, family medical leave, paid family leave, unemployment, or workers’ compensation benefits.
- You might be further insulated from liability for work performed, as the contractor might have its own business insurance.
- You can negotiate terms of the relationship and enforce them more freely under Contract Law.
- You can create more favorable payment terms and more easily restrict them from competing with you.
Disadvantages of Working with Independent Contractors
- You do not have much control over the way work is performed or when it is performed. Typically, your client and the contractor will have more control over these.
- You could be liable for injuries to the contractor’s employees, if the contractor has misclassified them or otherwise failed to provide workers’ compensation insurance.
- You must still ensure your employees are free from sexual harassment in the workplace, and this includes by contractors and their employees.
Advantages of Hiring Employees
- You can hire for attitude and give them the skills you need them to have. When you hire a contractor, you are likely hiring an expert who will tell you how the work will be performed—and who will likely command higher pay.
- You can cultivate them and celebrate their advancement, whether with your business or as they move on to higher education and other opportunities.
- You have more control over their performance and the term of the employment, unless you entered a contract that limited the employment-at-will relationship.
Disadvantages of Hiring Employees
- You will likely have to invest more time in training and cultivating them.
- You have more responsibility for their performance, earnings, benefits, and errors.
- You will often take on their personal issues, as well as their work-related ones, because you will probably spend more time with them, their moods will have greater impact on your entire workforce, and their work product will be attributed to your business, where poor quality work by a contractor will be more likely attributed to the contractor’s business.
For more on worker misclassification risks, see:
- What Are My Risks When Hiring a Freelancer?
- Nance L. Schick Talks to A Place for Mom About Caregivers Suing
- How to Respond to a NYS WCB Penalty Notice
Concerned you’ve misclassified workers? Tell me more
Nance L. Schick, Esq. is a New York City attorney and mediator who focuses on keeping people out of court and building their conflict resolution skills, especially in business and employment disputes. Her holistic, integrative approach to conflict resolution draws from her experience as a crime victim, human resources supervisor, minor league sports agent, and United Nations representative. She is a 2001 graduate of the State University of New York Buffalo Law School trained in Alternative Dispute Resolution (ADR) by the Equal Employment Opportunity Commission (EEOC), Financial Industry Regulatory Authority (FINRA), and International Center for Ethno-Religious Mediation (ICERM). She is also creator of the Third Ear Conflict Resolution process, author of DIY Conflict Resolution: Seven Choices and Five Actions of a Master, and an award-winning entrepreneur, who has been acknowledged by Super Lawyers (ADR, 2018 & 2019), the New York Economic Development Corporation/B-Labs (Finalist, Best for NYC 2015 & 2016), U.S. Chamber of Commerce (2015 Blue Ribbon Small Business), Enterprising Women Magazine (Honorable Mention, 2014 Woman of the Year awards), and Urban Rebound NY/Count Me In (Finalist, 2013 Pitch Competition).