Employee vs. Contractor: Critical Differences You Need to Know - AgileHR
  • Employee vs. Contractor: Critical Differences You Need to Know

Technology has changed the way we do business, and many companies are choosing to hire remote employees or contractors. There are many advantages to the flexibility that can be offered with these types of remote positions, but it is important to understand the difference between an employee and a contractor.

Contractors vs. Employees

A few considerations need to be made to determine if a person is working as an employee or a contractor. Some of the details that sets a contractor apart from an employee include:

  • The worker supplies their own tools, materials, and equipment
  • There aren’t set hours that the person is required to work
  • The worker participates on a temporary, as-needed basis

If the person is required to show up to the office each day at specific times and their work is considered an integral part of the business, then it is likely that the person should be classified as an employee.

Understanding the differences between and employee and a contractor can help you stay out of legal trouble. When companies hire independent contractors and try to treat them as employees, the company is crossing a legal line that can have serious ramifications. So, you need to make the decision about whether you are hiring an employee or contractor, and then be sure that the job is structured to be compliant. Here are some of the pros and cons to employees and contractors:

Advantages of Employees

Looking to build a strong team? Employees are an important part of any business. Here are a few reasons you should consider hiring an employee:

  • Loyalty and Team Spirit: Employees feel more loyalty to the company, which can often result in higher levels of productivity. The employees are looking to grow with the company, which can be beneficial for the long-term outlook of the team.
  • Cross-Training: It is possible to teach employees other roles and skills that are needed for various departments in the company, allowing a diverse and flexible workforce.
  • More Control: As a business owner, you have more control over the workflow and actions of an employee. If you want to closely monitor the work that needs to be completed, then you should choose an employee instead of a contractor.

Advantages of Independent Contractors

Want to save money? An independent contractor might be the way to go. Here are a few reasons you should hire an independent contractor:

  • No Cost of Benefits: Independent contractors don’t receive benefits such as health insurance, so you don’t have the cost burden of those benefits.
  • Lower Overhead: When you hire an independent contractor, you don’t have to provide office space, payroll services, or other types of overhead costs that are incurred for regular employees.
  • On-Demand Work: If things slow down, then you can reduce the hours that the independent contractor is working. Their time is flexible, and is catered to the needs of your company.
  • Focused Skills: Contractors have a very specific focus of skills and services that are offered, and the time spent on the project brings a higher skill set than what can be found with general employees.