The Pros and Cons of Hiring: Employee vs. Independent Contractor

September 4, 2015

As a small business owner you will need to determine whether to hire full time employees or use independent contractors. Don’t make the mistake of thinking they are basically the same thing. They aren’t.

Although you pay both kinds of workers to do tasks for you, they are not viewed the same by the IRS. And if the IRS suspects that you are not classifying your workers correctly, they might audit you.

The IRS defines independent contractors in this way: “The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

So, if you own a restaurant and hire two waiters, they would be employees. However, if you contracted a local handyman to come in as needed to fix anything minor that breaks in your restaurant, they would be an independent contractor even if you pay them hourly. The waiters show up to your place of business and work under you, while the handyman has his own business and simply shows up and fixes things his or her way.

There are pros and cons to hiring full time employees and independent contractors. Most small business owners wish to avoid the added overhead of having a slew of employees, but some don’t have a choice. You’ll need to evaluate your situation to determine what is best for you.

Read the full article by Yahoo Small Business for more information on the pros and cons of hiring employees vs. independent contractors.

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