Confused about hiring employees vs. contractor? With free downloadable cheatsheet

29th January 2018

Please don’t make the mistake of thinking that employees and contractors are basically the same thing. They aren’t. Here I explain the differences and why it’s important. You can also download my free guide!

As your business grows, you’ll need to hire people. Fact.

But, you may be confused as to whether it’s best for you to hire an employee or an independent contractor. Both will play a certain role in your business so it really depends on what you need. Sometimes it will be best for you to hire an employee, i.e. if you need commitment and control over how and when the employee works. However, other times it might be best for you to hire a contractor. For example, if you want to outsource a piece of work.

Understanding the difference between a self-employed contractor and a full time employee will save you a lot of headaches in the future. This will help you to set up your business with the type of workers that you need for long-term success.

Many companies find a combination of both employees and contractors works brilliantly – as it gives you the ability to flex up and down if needed, but allows you to have some stability year round with a core team.

So, what are the main differences?

1. Employee

An employee is someone who works for you. They are paid by you, via your payroll and tend to work a fixed number of hours each week (full-time or part-time).

When you hire an employee, you get the advantage of having complete control. You can direct that person’s work during work time, train the person in the way you want the job done, and require that person to work only for you (within reason). Generally, people are more committed and engaged, because of the job security.

But, the downside is employees have a lot of rights. You need to offer them a pension, maternity leave, sick pay etc in line with the government’s minimum. You also have the commitment of having to pay them each month, no matter how much money you make.

2. Self-Employed Contractor

A contractor is generally self-employed, and will invoice you for the work done, based on an agreed hourly or day rate. You still have some responsibilities, such as health and safety. This can be great if your business has busy periods and you need some extra help, without wanting to commit. Or if you need some specific expertise for a project that you don’t need to have on a full-time basis.

You can assign duties to an independent contractor and impose a deadline and work product, but you cannot tell that person how to get the job done. An independent contractor can work for other companies, can often set his or her hours of work, and often provides his/her own tools.

On the other hand, you have fewer responsibilities for contractors, as they have their own company and are responsible for their own tax and NI. Contractors have a lot fewer rights, but you still have some responsibilities, such as health and safety.

Free cheatsheet

I’ve created a free cheatsheet to explain how you know whether you need an employee or contractor

Hiring Employees vs. Contractors!

Download my free cheatsheet to explain how you know whether you need an employee or contractor

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit


So, which one is best for you?

Choosing whether to hire an employee or contractor really this depends on how you want to work with the individual rather than the role. For example Marketing Managers, HR Managers, Virtual Assistant’s and Admin Assistant’s could fall into either category.

If we take the example of a Virtual Assistant, you should be asking questions like: Does the virtual assistant have her own company name, work for you on a project-by-project basis, and operate independently with limited supervision? If so, then it’s likely that she is a contractor. However, if she works for you forty hours a week and you are her only client, it would be more like an employee.

So if you want:

  • Someone who will give you a long-term commitment
  • More control over the hours of work and over how tasks are performed,
  • To pay less as an hourly rate, in return for offering greater job security
  • To train the person to do work your way
  • Someone who’s part of your team – i.e. they attend your team meetings

Then it sounds like hiring an employee is the right way to go….

However, it may be better for you to hire a Contractor if you want:

  • Low commitment – you just need someone to do a job without committing to a salary, benefits etc.
  • Greater  flexibility. When you work with an independent contractor and it isn’t a good match, you simply don’t hire them again. When you have an employee that doesn’t work out, you may need to fire them, which isn’t always easy.
  • A remote / specialist service – you can hire the right person for the task needed, so you don’t need to train them or have them working from your office.

Why is it important?

If you get the ’employment status’ wrong i.e. you hire someone as a contractor but you work with them like they are an employee and HMRC find out, you can be fined and be asked to pay back the difference in tax. Some people hire Contractors in order to avoid paying as much tax and national insurance. But HMRC are cracking down on this. You can’t have your cake and eat it, where HMRC is concerned.

Feel free to download my free guide has a really useful and easy to follow table summarising the big differences between employees and contractors! And a bit more information on the penalties for getting it wrong.

Free cheatsheet

Hiring Employees vs. Contractors!

Download my free cheatsheet to explain how you know whether you need an employee or contractor

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

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