When a small business owner starts to see a need for more people to work within his or her business, they are faced with the dilemma of hiring an employee or contracting the job out to a freelancer. Both situations have their advantages and disadvantages. The hard part is deciding which is best for your small business. Before exploring the pros and cons of using a contract worker for your small business, you should check to see the laws in your country regarding contractors. In Canada, the Canada Revenue Agency sees a contractor as an employee if you are the only company they work for.
If hiring an employee, consider that an employee is more likely to view your company as offering potential job security. Therefore they are more likely to invest more of their energy into furthering your company’s goals and success. By hiring an employees, your business increases its chance that you will have a person whose goal it is to make your small business to succeed. Their dedication and continuity will also help your customer confidence.
Remember that many of your clients do repeat business with you based on the business relationship you have formed with them. Your customers want to deal with someone who is familiar with their needs and is consistent with how you deliver your product or service to them. This can be difficult when you are using freelancers or short-term contract workers.
You also have to consider the cost of training a staff member over a contractor. Once a staff member knows your systems and procedures, he or she can only grow more to help your small business. Then consider how much it will cost you to train a new contractor every time you bring one on board.
The positive side of hiring contractors is that it can provide your small business with flexible staffing. When your small business has its busy periods, contractors and freelancers are great to have around. During slower periods, not having to pay a contractor or freelancer may result in substantial overall payroll savings. As well, with freelancers or contractors, you may not need to supply them with a desk within your office space.
One benefit of utilizing contractors over hiring employees is that contractors can bring experience and expertise to a particular project on a short-term basis. Sometimes you may even need a contractor to train employees on particular software or new procedures that would otherwise take your staff much longer to learn on their own.
When considering hiring an employee or using a contractor (even at the same rate of compensation), also consider the required paperwork and government-mandated payroll procedures. Your business could also avoid paying the employer’s contribution to government pension plans, workers compensation, employment insurance and other government-mandated payroll deductions.
Deciding whether you take on a contractor or hire an employee may most likely depend on what type of position you’re trying to fill within your small business – as well as how your small business sees the position developing over time. In some cases, the taking on a contractor for a specific position within your small business may not work, because the position you need to fill may not lend itself to freelancing. When was the last time you heard of a freelance sales manager or a freelance comptroller?