Are You Hiring an Employee or a Contractor?

by | Aug 29, 2019 | Running Your Business

If you want to grow your business, you can’t do it alone. That’s a fact.

When you do everything yourself – bookkeeping, marketing, HR, IT, and more – you spend more time working in your business than on your business. That means you can never really expand beyond where you are right now.

Let’s be honest, when you’re wearing all the hats, one or more of those roles ends up undone. Usually because of time constraints, but sometimes due to lack of knowledge or enjoyment.

The first step to growth? Examine your business processes and find out where you’re spending too much time. Who can wear that hat for you?

Often, small business owners start out by hiring a contractor or two, but you may choose to hire an employee instead.

Here’s the difference:

Independent Contractor vs. Employee

In many ways, an independent contractor and an employee may seem the same. In fact, they may perform the same exact duties and work the same exact number of hours.

The key difference between the two comes down to taxes. According to the IRS, an employer is responsible for withholding taxes, income tax, social security tax, and Medicare tax from an employee’s paycheck. An employer is NOT responsible for withholding any taxes from an independent contractor. Instead, the contractor is responsible for paying both employer and employee taxes on their own.

Other differences include:


As a business owner, you can completely control how your employees spend their time (within legal boundaries). For instance, you can say that they have to work from 8:30 am – 5:00 pm, Monday through Friday. You can further break down what they do during that time, for example:

8:30 – 9:30: Cold calls

9:30 – 10:30: Answer emails

10:30 – 12:00: Mandatory training

12:00 – 12:30: Lunch

In addition, you can train your employees to do your work in exactly the manner you like, using the tools that you choose.

If they fail to meet the terms of their employment, you can terminate them at will (usually).

Of course, that freedom comes with an absolute ton of federal and state regulations, including minimum wage requirements, overtime, promotions, discipline, and more.

Independent Contractors

On the flip side of the coin, you have independent contractors. When you hire a contractor, you have almost no say over how or when they work.

You can give some direction, such as assigning duties and imposing a deadline, but that is about it. As long as they get the project completed on time, that’s all that matters.

They can work for other people at the same time they’re working for you, they can work at any time of day they choose, they can use the tools and software they prefer, and they set their own rates.

Many small business owners, however, are willing to put up with whatever slight inconveniences that might offer.

Why? Because when you hire an independent contractor, all of the federal and state regulation and oversight virtually disappears. You have to report how much you paid the contractor for the year come tax time, but that’s about it!

How do you know if you should hire an employee or a contractor?

In the end, it comes down to how important your processes are to you.

Do you need to have absolute control over everything that happens in your business? Or are you ok relinquishing some of your power (as long as the job gets finished on time and in an acceptable manner)?

Need some help deciding? Schedule a consultation and we can go over all the pros and cons together.

And don’t forget: For more information on this and other topics like it, subscribe to my YouTube channel for weekly updates and advice!




You may

Also like

Outsourcing Customer Service for Flexibility and Growth

Outsourcing Customer Service for Flexibility and Growth

This article was provided by our partners at Alliance Virtual Office and may contain affiliate links. 2021 is proving to be the year that small businesses prove their strength and resiliency. Companies are consolidating the lessons they’ve learned over the past year...

read more
How Much Does It Cost to Trademark a Name or Logo?

How Much Does It Cost to Trademark a Name or Logo?

Unquestionably, having a registered trademark is the best way to protect your brand elements like a business name and logo. So how much will it cost to trademark a name or logo? USPTO Fees The USPTO application filing fees will depend on a few different factors: If...

read more