Your small business has grown enough that you can’t handle it all by yourself. Congratulations – that’s quite a milestone to have reached!
But now that you’re looking at bringing someone on to help manage your workload, you’re not sure what’s the best option. Do you bring someone on part-time or full-time? Or do you opt for the contractor route?
The short answer is that it depends. Some small businesses opt for a contractor-only route. Some gradually grow their roster of permanent staff members. And others “supplement” with contractors. Let’s take a look at why going the contractor route can be a good decision for your small business.
Contracting reduces your liability
When you hire a contractor, you’re doing so on a short-term, project basis. While a contractor’s fee will typically be higher than a full-time staff member’s hourly rate, you won’t have the same obligations around benefits. That means not having to chip in for healthcare, vacation and sick leave, or payroll taxes, costs that for a small business can be significant.
Not only that, but once the contract is complete, so is your commitment to that worker. Permanent employees, on the other hand, are entitled to benefits – and expect to have a role that’s going to be there indefinitely. No wonder contracting can result in savings of around 30%.
Contracting gives you budgeting flexibility
Working with contractors gives small businesses flexibility around staffing and budgeting. It gives you the opportunity to see the kind of skills and individuals that work for your business. It gives you the flexibility of committing to a particular project or assignment up-front, and then the ability to subsequently rework your staffing levels.
This flexibility allows you to iterate, growing your product or your offerings along a bottom line that you know is sustainable. It also allows you to manage slow periods alongside growth ones – and keep your business in the black.
Contractors let you test the water
Hiring a contractor to help out with a project is a good way to learn about yourself, your business – and the kind of staff you might hire down the road. If you’re new to hiring, think of it as an opportunity to examine how projects are run in your company, and what kind of help you need along the way.
Many companies hire on a contract-to-permanent basis for this reason – this approach lets them float the idea of a permanent engagement if the contractor is a good fit. Bear in mind, though, that neither company nor contractor is obligated to pursue a permanent opportunity.
Contractors let you quickly grow and shrink
Perhaps you’re a software company that pushes a major release every few months. Perhaps you’re in retail and the holidays are your busiest season. Whatever the case, your staffing requirements are going to ebb and flow – sometimes significantly.
Working with contractors lets you quickly build the team you need to meet your business needs, and then shrink back down when things return to normal. You may end up building a whole team of contractors – or just supplementing your existing team of pros. And with many contractors working off-site or using their own equipment, you may also get to benefit from freed-up local resources.
Contractors don’t require training
While even the best contractor will need a bit of help getting up to speed on your business, the idea is that they’ll jump in ready to go, with all the necessary skills and expertise. Unlike for an employee, you won’t be providing regular training or skills development for a contractor. In fact, if a contractor is around long enough that you’re beginning to provide ongoing or periodic training, then it’s time to rethink whether you’ve hired a contractor or an employee. When it comes to taxes, the difference matters, to you and the contractor.
When does a contractor become an employee?
One of the things to watch out for as a small business owner is the very stringently defined terms of engagement around hiring a contractor. It can be easy for the line between what constitutes an independent contractor and what constitutes an employee to blur.
If you’re setting your contractor’s work hours, have them indefinitely engaged, aren’t receiving invoices and are the contractor’s only client, then you may have hired a permanent staff member without realizing it. The IRS takes this kind of thing very seriously – so make sure that you have the relationship properly defined, and that you’re meeting your tax obligations accordingly.
At PrideGroupCo we’re experts in helping small businesses grow with the support of highly qualified contractors. If you have any questions about bringing a contractor on board, or you want peace of mind that you’re meeting your obligations around your staff and your engagements, get in touch! We’d be happy to discuss the ins and outs of contract hiring with you.
Let our team handle all the back office details while you work on the front end of your business.
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735 Plaza Blvd., Suite 210
Coppell, TX 75019