1099 Contractor or Employee?

As we start our businesses, there are so many financial decisions we need to think of. One of the most commonly asked questions is; Should I hire a 1099 contractor or an employee?

Often times as business owners, we get busy and do not have time to research the Pros and Cons. It is my pleasure to break those down for you, giving you the information you need to make an educated decision.

Employee

1099 Contractors

Pros:

  • Saving on benefits and a salary as you are not required to pay these to a contractor, even if the pay per hour is higher than an employee.
  • You make the decision to work with the contractor or not. It’s not always as easy to fire an employee.
  • You can hire a specialized person for a particular task because they often have years of experience already.
  • Contractors have to figure out their own work permits and licenses.
  • There are no health benefits for contractors, which can save you money.

Cons:

  • You don’t have control over how a task is done since you can’t see what they’re doing.
  • They are hired for a short time so you might not have the continuity you desire.
  • There is no sense of company loyalty and will not promote your brand.
  • Unless you write a contract stating differently, the copyrights belong to the contractor.
  • There are no fixed rates, which means a pay schedule can vary depending on the project.
  • While you can give general specifications of when the work should be done, you don’t have the ability to set a work schedule.

Employees

Pros:

  • Employees often feel more pride in their position with your company. They feel the security of a workplace they can call their second home, while feeling long-term security and part of a group.
  • The hourly wage of a full-time employee is often less because there is job security. Whereas you can expect to pay more for freelance services.
  • You don’t have to worry about an increase in work because you have a reliable staff. Freelancers can be booked if you need them and they are available.
  • You have the ability to delegate and can assign tasks to an employee that you may not feel comfortable assigning to a freelance contractor, which can free up time for you to do other things.

Cons:

  • Most full-time employees expect benefits, like vacation time and health care.
  • Pay has to be done consistently, even if the business has a period where it’s not growing.
  • You have to have a payroll paperwork, which is legally required.
  • You have to cover the employees training and licensing for work.
  • It is easy to become less involved in the day-to-day operations of your company, as you gain people with management skills, as your business grows.

Know you are not alone, as we can help facilitate your 1099 contractors and your employees, through our payroll system. Read more on UpCounsel.

Have questions? Contact us today!

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