With skilled workers hard to come by, many companies are turning to independent contract workers to supplement their hiring needs.
Hiring independent contractors can indeed be a smart business move: Contractors are often highly skilled individuals, who bring expertise and enthusiasm to the job. And because they often rely on referrals for work – and understand their reputation precedes them – they produce high quality work for those who hire them.
Below are some other factors to keep in mind when hiring contract workers.
In addition to getting high quality work and benefiting from the expertise and renewed perspective of an outsider, employers stand to benefit in other ways when they hire contractors. For instance…
They save money. Generally, contract employees cost less than permanent employees, because employers don’t have to worry about providing benefits, office space and equipment. They also save on expenses related to Social Security and Medicare, the Affordable Health Care Act, state unemployment compensation insurance and workers’ compensation insurance.
They save time training and onboarding. Most independent contractors bring specialized expertise to the job, so they are usually productive immediately, eliminating the time and cost of training.
They reduce their exposure to lawsuits. Unlike full-time employees, independent contractors do not have the same rights under state and federal laws, minimizing the number of legal claims they can potentially bring against employers for violating those rights.
Of course, hiring contractors isn’t for everyone, and it’s not all sunshine and wine-flavored lollipops. When hiring independent contractors, it’s important to consider the following risks:
You have less control over your workers. Many independent contractors choose their work precisely because they enjoy the autonomy and independence of the job; however, as an employer, that likely means also giving up a certain amount of control over your contractor’s work.
You may see less consistency in work and productivity. Independent contractors, because they’re only needed for relatively short-term projects, are constantly coming and going, which can be inconvenient and disruptive. Not to mention that, because not all contractors are created equal, so the quality of the work they provide will be uneven. The far-reaching effects of such inconsistency could lead to dissatisfied clients and loss of business.
Three Tips for Hiring Independent Contractors
When hiring contract workers, it is imperative to be extra cautious on three particular things:
- Your written agreement. Your right to terminate an independent contractor’s services is limited by the terms of your written agreement. If you fire a contractor in violation of the agreement, you could be liable for breach of contract. Also, if you hire an IC to create a work that can be copyrighted — such as an article, book, or photograph – and you want to have ownership of that work, make sure those terms are outlined in the written agreement as well.
- Your company’s worker’s insurance policy. Unlike with full-time employees, independent contractors who are injured on the job are not always covered by workers’ compensation insurance; therefore, if they are injured on the job, they might be able to sue you and recover damages.
- How you classify contract workers. Before hiring a contract worker, be sure you’re clear on what constitutes an independent contractor versus an employee, and make sure you’re classifying them correctly. When you misclassifying workers as independent contractors, not only do you face substantial tax bills and other penalties, you could also face a state or federal audit.
Tell us: What has your experience been like working with independent contractors? What advice would you offer others?