This or That: Should I Hire an Employee or Contractor?
Small business owners participate in a constant and complicated balancing act. When you’re running a nonprofit, this is especially true. Limited time, resources, and the desire to best fulfill your mission drive you to seek the most efficient means of running a business. For some, this can look like three employees sharing a bedroom office. For others, it is two full time staff members working remotely, and sometimes, it involves the use of contract workers to fill in gaps.
Understanding the difference
Before you can effectively decide on a system or combination of systems that works for you, you have to understand the difference. An employee works for a person or organization and has a contract of hire, which means the employer has a say in the specifics of work performance. The employee accomplishes work in the way that you choose, and typically works only for you. They come with rules though--overtime, health insurance, payroll taxes, Social Security and Medicare taxes, etc.
Independent contractors work a little differently. While you still give them responsibilities and deadlines, you get less of a say in how exactly they accomplish their tasks. They’ll typically work remotely, set their own hours, and use their own tools, and they’ll almost always work for other people. As the one providing the work, you won’t have reporting or tax responsibilities for them (minus a Form 1099-MISC), which can be a huge advantage.
One or the other
Whether you choose to hire an employee or a contractor will depend largely on the type of work you need done. If you need total visibility for work and equipment, you’ll want to go the employee route. If the work is dependent upon location or hours (like a front desk person) you’ll want to hire someone. If you’re going to need a person to perform the job long term to perform an essential function, a contractor (who can easily walk away) may not be the right fit.
If your business could technically (however inconveniently) function without a particular role, it may be a good idea to fill it with a contractor. It’s a great idea to outsource tasks that fall outside your area of expertise to contractors, who tend to be masters in their field and can work without supervision. Short term or project-based work is also perfect for contractors, even if it eventually morphs into a larger position within your organization.
The bottom line
Hiring a contractor may very well save you money and add greater flexibility to your organization, but it isn’t always the best choice for your nonprofit. It’s important to analyze the specific needs of your company and make a decision that is both cost effective and fair to individuals who work with you in some capacity. Ultimately, many organizations choose to retain a few employees and supplement with contractors--find a compromise that works for you!
Come back next week for part 2 of our Employee vs. Contractor series to learn more about the differences and advantages of each.