Lucey Accounting understands that it can be a dilemma when considering to hire an employee or a contractor.
The difference between a subcontractor and an employee can be very subtle. A subcontractor (independent) contractor can work for others, can often set his or her hours of work, and often provides his/her own tools. On the other hand, you have few reporting or tax responsibilities for independent contractors. ... The payroll responsibilities for an independent worker are significantly less than for an employee Let’s look at some Pros and Cons.
Employee - Some Pros on hiring an employee
Loyalty- Employees have a stronger loyalty to the company they work for. Independent contractors work for multiple companies. More Control-it is easier to guide an employee. With an employee you are free to alter his or her role or ad additional responsibilities. You can also set guidelines for when the employee reports to work.
Better work flow- Businesses tend to operate more efficiently with employees than independent contractors. It is much easier to coordinate a project or job when you can simply walkover to someone’s desk. There is no guarantee you will be able to contact a freelance or independent contractor when a job needs to be complete.
Employee - Some Cons on hiring an employee
More overhead-hiring an employee is more expensive than hiring an independent contractor you have to pay the health insurance, a portion of taxes, work related expenses and supplies, and 401K
Greater management role-the more employees you have, the more time you will have to spend managing them. Less work is involved with independent contractors because they operate almost autonomously.
Hiring a subcontractor which is a 1099 contractor, they are technically not an employee. They are paid a set amount for an agreed upon task or project. Independent contractors do not receive benefits, they pay their own taxes and health insurance. They do not receive paid holidays, vacation time or sick time. In exchange they are free to work completely on their own schedule.
Subcontractor - Some Pros on hiring a subcontractor
Reduced overhead-Again, using independent contractors is much less expensive than hiring full time employees.
No health insurance costs-The high cost of insurance is a major financial burden on many companies. When you use an independent contractor, this is one cost you won’t have to worry about.
Adjusting to varying workloads-When you use an independent contractor you can bring additional help when you are really busy but you are not stuck with those employees on payroll when business slows down. There are write offs that you can take off on your taxes also including but not limited to office space, travel, office supplies, tools etc. Expertise-Contractors typically are well trained in their field and can hit the ground running with minimal training. They can focus on a very specific project that you might not have expertise on. (For example: marketing your business vs accounting)
Subcontractor - Some Cons on hiring a subcontractor
Lack of control-you cannot tell a subcontractor when to report to work or how long they must stay. In fact, it is against the law. You also cant stop them from working with other companies and putting a higher priority on projects. The only recourse if you are unhappy is not to hire them again.
We’d love to find out more about your business and how we can help you with your Accounting needs. Call us at 480-656-9613 or email us at firstname.lastname@example.org to set up your no-cost, no-obligation 30-minute Accounting and QuickBooks assessment.