Three factors to consider as you weigh the pros and cons of hiring a new employee or outsourcing the work to a contractor.

Technology can only help a business grow so much; at some point you need more people on board to sustain growth. Here are three things to consider when it’s time to decide between a hiring a new employee or an independent contractor.

The relationship

When you add someone to the payroll, you get to direct how they do the work. If needed, you can change their assignment. This control, however, comes with laws and regulations on wages, overtime and other rules. And, you’ll have to pay payroll taxes in addition to salary.

By definition, an independent contractor does the work how they see fit. They also set their own hours and usually use their own tools. You’re off the hook for payroll taxes, however, you’ll still have bookkeeping in association with contractors because you’ll have to collect their W-9s and file a 1099-MISC form with the IRS each tax year.

The importance of the role to your mission

There are two kinds of work that need to be done: the work that’s critical to your business and the work that’s not. Essential work is usually best assigned to an employee, especially if it is a long-term need. For work that’s not part of your core business purpose, a contractor can often do the work for less than what it would cost to hire an employee.

Your need for flexibility

Some business needs ebb and flow. Ask these questions as you weigh the pros and cons of hiring an employee vs. an independent contractor:

• If you hire an employee, is there is enough work for them all year round?
• Does the value added by an employee exceed what you pay them in salary and benefits?
• Is the need seasonal or sporadic? If so, an independent contractor can pitch in just when you need them.

Also, if a contractor doesn’t work out because of skill, personality or any other reason, it’s easier to let them go and find someone who is a better fit. On the flip side, with an employee, you’ll gain loyalty and someone who understands your business more fully.

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