Does your organization hire only permanent employees? Or does it use a mix of employees and independent contractors? Or perhaps you rely solely on independent contractors and have no permanent staff?
As technology changes, enabling an ever-increasing number people to work off-site, the use of independent contractors is growing. Like any business decision, this should come with many considerations. Let’s take a look at the primary benefits of using independent contractors.
Here are the some of the bonuses of using independent contractors:
- Flexibility. Independent contractors can be brought on as needed—and when the project is complete, the independent contractor moves on. There is no need to fire someone when workloads change. Additionally, if you discover that the independent contractor is not a good fit with the organization, simply don’t bring him or her back on board after the contract ends. This also helps you easily address seasonally specific work needs.
- Access to specialized skill sets. There may be specific skills the organization needs to tap into to accomplish its goals—skills that are not part of the normal employee skill set in that organization. Finding independent contractors with these specialized skills can be a way to access the necessary skills and experience without the need to hire someone full-time for a role that might not warrant a full-time/permanent position. An independent contractor usually already has any necessary licenses or permits to perform his or her job.
- Reduction of lag time between hiring and full productivity. When bringing a new hire into the organization, it is assumed there will be a lag between the hiring date and the time the individual is fully trained and productive. Independent contractors, on the other hand, often have specialized skills and require far less training (if any), allowing the employer to get more accomplished faster.
- Ease of payroll administration. As long as the independent contractor is appropriately classified as such, the administration of payroll and related items is usually much simpler. This is because the employer is not responsible for withholding payroll taxes for an independent contractor and can simply pay the agreed-upon rate. There also is the lack of administration of employee benefits in this scenario, further freeing up admin time.
- Cost savings. Despite the fact that independent contractors often cost more per hour than employees, there are substantial cost savings that usually more than offset this difference. For example:
- Reduction of administration burden, as noted above.
- Savings from not providing benefits (e.g., no health insurance costs or retirement contribution costs).
- No costs associated with workers’ compensation insurance or unemployment insurance for these individuals.
- Lower recruiting costs.
- Minimal or nonexistent training expenses.
- Independent contractors typically don’t get any type of paid days off, which is both a direct and indirect savings because it also translates to less loss of productivity.
- Reduction of costs for office space and equipment, since independent contractors typically use their own equipment, and sometimes even their own work space.
- Reduced legal risks. Another benefit here comes from the fact that these individuals are not being hired and fired in the traditional sense. By default, this lessens the risk of unlawful termination and similar lawsuits. Independent contractors are also exempt from many wage and hour and antidiscrimination laws.
Does your organization utilize independent contractors for some projects? What criteria have you set aside as ideal for utilizing independent contractors rather than hiring permanent employees? What other benefits have you found?
*This article does not constitute legal advice. Always consult legal counsel with specific questions.
About Bridget Miller:
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.