Tips for Hiring an Employee versus Independent Contractor

by / Monday, 24 March 2014 / Published in Arizona Accounting Small Business Tips

Are you too busy to handle all of the functions of your business? It might be time to hire someone to help you. Develop a job description for the person you want to hire. Think about the responsibility of having an employee versus hiring an independent contractor. There are key differences to hiring one over the other. Choose what is best for your business.

Here are tips for hiring an employee versus an independent contractor:

  • Create a job description for the person you want to hire. Define skills and experience along with personality traits. You want to be sure they fit in with the culture of the company. While you may not be able to afford the ideal candidate today, you understand where you want to grow and who you want working with you.

  • Review finances and future growth of the business to determine the best time to hire someone. You might be overwhelmed to day but cannot afford to pay someone for another month or so. There’s nothing worse than hiring someone for your small business only to find out you can’t afford to keep them.

  • Determine they type of help you need in your business today. You may find you are hiring an employee versus an independent contractor.

What’s the difference between an employee and an independent contractor?

If you are specifying hours, place of work, order or process for completing work, you have an employee and must pay according to the laws for being an employer.

If you are specifying only the scope of work and timeframe for completion under a specific agreement for a specific period of time or length of project, you have an independent contractor. All other aspects of the work are the responsibility of the contractor. They set their own hours, place of work and are using their own equipment (computer, copier, tools, etc.) to complete the work. There are no employee benefits such as healthcare, paid time off and retirement funding. They may also be working for other businesses.

As a business owner it is important to not only define who you want to hire, you must also understand the scope of their work to determine if they are classified as an employee versus independent contractor.

Additional information about independent contractors and employees can be found on IRS.gov.

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