When it comes to forming your core team for the business, it’s likely to be a challenging and overwhelming task. It not only involves money and competence but time, trust, and intuition. As a business owner, you are likely to oscillate between hiring full-time employees and contract workers.
But the reality is that if you are settling for anyone kind, you are going to miss out on a lot of things. To decide whether you should go for a contract worker or a full-time employee, you must first understand the difference between these two options, their pros and cons, and which one is suited to what industry.
Full-time Employees vs. Contract Workers
An employee’s name is going to be present on the payroll of the company and receives monthly payments and benefits by offering service to the company. The employees are expected to remain loyal to the concern and follow the organization’s regulations. On the flip side, a contract worker is an independent person with autonomy as well as flexibility. Such workers do not receive monetary benefits like paid leave and health insurance. If you fail to classify your employees, it can lead to undesired consequences like taxes, penalties, fines, and even legal disputes.
- Contract worker
Contract workers refer to those who are hired for the completion of a specific span of time. The word ‘contract’ indicates an agreement between the firm and a contractor that works on a per-assignment basis. Generally, hiring contractors are considered as outsiders and not the core member of the company. A business may hire a contractor for a particular assignment or a specific time span. Contract workers are compensated based on negotiated rates for a project or per day payment.
Contract workers are independent employees and should be treated as a distinct business entity. In essence, such employees offer a service for which the recruiter will have to pay. Some important aspects of hiring contract workers include:
- Payment of taxes is made from the remuneration received from the company
- Equipped with all the equipment and supplies required for the service
- Works based on per-project or per term basis
- Sends across the invoice and expects to be paid based on terms of the contract
- Full-time employees
As we all know, a full-time worker is expected to provide consistent service to the firm. Such workers follow a predefined schedule along with a job function guiding the daily routine. Their pay is also decided depending on their past experience and working capacity within the firm. Full-time employees also work with a team which allows them to build a lasting companionship through shared work experience.
When an employee is termed as a full-time worker, the circumstances centering taxes are also different from a contract worker. Some critical aspects about full-time employees are:
- The company can dictate terms on the working method and prepare a schedule
- The company can decide the payroll and control monetary benefits
- The recruiters decide on vacation, sick days, and paid leave
- The recruiters can also determine the extent of the employees’ relation with other stakeholders
Why should a company hire a contract employee?
Hiring contract workers is definitely a smart move for the company as they proffer a host of benefits. For instance, a business can keep them for short-term projects or as required from time to time. It also leads to curtailed overhead operational costs since there will be lesser employees with paid benefits.
Moreover, the company also gets access to highly skilled professionals for special projects in which no in-house employee is adept. Some contract workers also work from a remote location or their home office. As a result, it paves the way for extra savings since they are not using company resources.
It’s worth mentioning that there is a thin line of difference between a regular employee and a contractual worker. So, a company should check with the employment law attorney to know more about classifying the employees in the right way so that there is no discrepancy concerning taxes and benefits.
The Bottom Line
The fast-changing professional environment today has made it almost imperative for companies to hire contract workers and freelancers. And the two most crucial reasons why such people are welcome onboard are specialized skills and budget concerns. They are retained for a pre-determined time in exchange for fixed pay and helps in saving the company expense to a great extent.
