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Should I Hire an Independent Contractor or Employee?

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Chris Bibey

As a small business owner, it is important to know when you need additional workers and when you can hold off on hiring. This can be a slippery slope, especially when you begin to consider all your options.

At some point, you may be faced with an important question: is it best to hire an independent contractor or employee? Since there are pros and cons of both, you never want to jump the gun and make a rash decision.

When to Hire a Contractor

Although every small business is in a unique position, there are times when it makes most sense to hire a contractor. Consider the following:

  • You don't have employees on staff to handle specific tasks
  • Uncertain demand at the present time (you don't know how long you will require the person's services)
  • The job task requires a specialized skill

When to Hire an Employee

As tempting as it may be to hire contractors time after time, you must consider the fact that you can only control such workers to a certain degree. Here are some circumstances in which it makes more sense to hire an employee:

  • Ability to assign specific tasks at any time, without worrying that you are "crossing the line" that could get you into hot water with the IRS
  • Assurance that the person is going to work exclusively for your company
  • Opportunity to provide targeted training related to the position

It can be a challenge to decide if hiring a contractor or employee is best for your company. If you have any questions regarding how this will impact your tax situation, review this information from the IRS while also working closely with an experienced accountant or attorney.

Some companies only hire employees. Some only hire contractors. And some have a mix of both. What is going to work best for your organization?