Should You Hire an Employee or a Contractor? 

Many small business owners will need to hire someone at some point. There’s no formula for determining when you’ll reach that point, but if you feel you’ve been working around the clock, or you can’t keep up with your current volume of business, now may be the time to bring someone on board.

First, you’ll need to figure out whether you need an employee or an independent contractor. The following is an overview of the pros and cons of hiring employees or contractors.

Hiring Employees: Factors to Consider

If you hire an employee, you control how, when, and in what capacity they work. So if you need someone to work specific times, or at a specific location, you’ll need an employee. And if you need someone to fulfill an essential role – like management – you’ll definitely want an employee instead of a contractor.

Before hiring an employee, you’ll have to ensure you’re prepared to handle payroll, along with your payroll tax obligations. You’ll also need to make sure you’re in compliance with laws regarding fair employment, overtime wages, and other workplace issues.

Working with Contractors

The most obvious benefit of hiring a contractor is that you don’t have to worry about payroll taxes and numerous labor laws (although you still have to track paychecks and report them annually via a Form 1099-MISC).

With contractors, you cannot legally dictate the manner in which they work, and they are free to work for other businesses, too. Certain actions could, in the eyes of the Internal Revenue Service, trigger an actual employer-employee relationship. For example, if you provide a contractor with equipment, such as a computer, or require a contractor to report to an office for training, the IRS might consider that contractor to be an employee.

Other Alternatives

Business owners may find that their needs don’t quite align with hiring a full-time employee or a contractor. And there are alternatives. You may want to hire someone on a part-time or seasonal basis. You may also want to look at staffing agencies – they find, screen, and interview workers, and they handle payroll (usually, businesses pay them a fixed hourly rate, and they deduct a fee from that rate before paying workers).

Some small businesses outsource tasks to other companies. Marketing, advertising, and social media are functions that an outside firm can easily fulfill, and some companies enlist the help of independent accountants to handle their bookkeeping.

A business that needs help during the summer only may be able to hire an intern – but that’s an employment arrangement that’s subject to strict U.S. Department of Labor requirements. If you want to hire an intern, getting legal advice is essential.

Lusk Law, LLC, focuses on providing legal advice to small business owners, helping to avoid litigation when possible and actively representing our clients in court when litigation is necessary. Our experienced attorneys have provided legal counsel and representation to entrepreneurs in Frederick County, Howard County, Montgomery County, Baltimore County, Baltimore City, Carroll County, Washington County, Anne Arundel County, and other counties in Maryland. If you need legal advice for your small business, please call us to schedule an appointment.

What Freelancers and Small Businesses Should Know About Liability

If you are a small-business owner or a freelancer, you most likely don’t have deep pockets to reach into if you get sued and lose your case. As the…