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Contractors & Employees - What’s the difference?

As your business grows, so does your need for a larger workforce. When this time comes, you'll need to make the all important decision of "to hire a contractor or employee?". Before you can even begin to answer that question, you need to know the facts. So, let’s settle this once and for all - what are the differences between contractors and employees?

Let’s Start With Independent Contractors

Right, an independent contractor is anyone who works on a contractual basis to complete a project or assignment. These can be:

  • A sole proprietor
  • A freelancer
  • A professional with a Limited Liability Partnership

Basically, a contractor is anybody who provides work for a company, without being on their payroll. By definition - they’re NOT an employee, they deal with their own taxes and work when and wherever they want.

Why Independent Contractors?

So, why do people opt for independent contractors, you ask? Here are just a few of the many reasons why.

  1. Fast access to new tech and skills - by hiring a contractor you’re able to quickly get an expert in the field, who’s trained in the latest tech. This saves you both time and energy.
  1. Flexibility - by using contractors, businesses are in a more easily adaptable position, being able to grow and reduce staff numbers with the market. Which brings us nicely on to…
  1. Ease of termination - typically, when working with a contractor there’s a get-out clause, which means you can end a contract within a few weeks, without giving reason.
  1. Reduced legal liability - contractors deal with their own insurance.



Now, Onto Employees

On the flip side, employees get paid a regular wage, and complete work that’s dictated by the employer, whether that be on a full or part-time basis. Taxes are automatically deducted from their wages, with location and working hours being at the discretion of the employer.

The benefits of hiring employees are:

  • Culture Fit - by hiring employees, you can create a team of like-minded, trained employees who share the values of the company.
  • Training - you can provide the training you deem necessary for your team, building trusted and reliable individuals.
  • Control - you have control over the work that employees do, and can rest easy in the knowledge that the essential work is being handled internally.

It’s important to remember that with the hiring of employees comes a greater responsibility. For example, payroll responsibilities will be greater, as well as insurance, and law/regulations surrounding redundancies and firing.

Want to learn more?

So, there we have it - the fundamental differences between employees and independent contractors.


Want to find out more? Be sure to download our free E-Guide today, where we cover everything from new employment policies to creating a hiring plan.