10 Benefits of Hiring Independent Contractors Over Employees

Once the world got used to having the internet, the way we see companies, jobs, and daily work changed significantly. Many companies turned to a remote-first model. Others started relying on hiring freelancers and contractors instead of employees.

Hiring independent contractors is often a smart business decision that saves your company time, effort, and money. So, independent contractors have helped curb costs in so many ways. But are they really worth hiring, or should you go with employees instead?

Let’s dive in and explain the benefits of having independent contractors in your company.

Hiring independent contractors - top ten benefits

Most companies are more likely to be hiring regular employees. There is nothing wrong with that, as hiring employees has its own benefits. But, hiring independent contractors can also be very beneficial for your company. It can be more cost-efficient and productive because you only pay for the job needed without incurring other costs.

Here are the top 10 benefits of hiring independent contractors that you need to consider for your business:

1. Lesser costs

Companies are always looking for ways to cut costs, increase productivity, and hire contractors.

While their rates might seem high initially, you are not subject to some other expenses that come with hiring employees.

Here are some expenses that are crossed out when a company hires contractors instead of employees.

1. Payroll taxes

2. Insurance

3. Overtime pay

4. Office supplies and equipment

5. Bonuses

When hiring workers for long-term projects, it might be more cost-effective to hire them as employees and take on these expenses. However, for occasional or niche projects, it is usually worth paying the higher rate for independent contractors.

2. You are working with experts

Independent contractors are independent workers with expertise in their field. Your employees usually require training and mentorship from their managers.

Independent contractors generally have great expertise and require little to no guidance on how to complete the task. With independent contractors, you can count on individuals who are already skilled for your company.

3. Higher efficiency

Another salient benefit of hiring contractors is reduced lags and better efficiency. Hiring independent contractors is a quick and simple process. The independent contractor does not need to understand the big picture, an in-depth understanding of how your company operates, the company culture, or other aspects that may slow it down.

Rather, hiring independent contractors skips the usual onboarding process of an employee. They don’t need any training that the usual employee must undergo to attain the requirements needed to do a specific job. They can start as soon as you agree on the scope, which can help speed up the completion of the tasks.

4. Less or no overhead expenses

With contractors, a business does not have to worry about offices, equipment, or other overhead expenses. When having employees, the company generally has to worry about these overhead expenses.

Independent contractors are independent business owners. They have their own office, equipment, tools, and even trained people for your contracted job. Their overhead costs are already calculated into their rates.

5. No employment benefits to consider

Another factor to consider is the responsibility of providing employment benefits to employees. These are nonexistent when you hire independent contractors.

Hiring independent contractors will be far cheaper for your company. Benefits usually given to employees are not always provided to contractors. Plus, employment benefits are not the same as contractor benefits.

Employment benefits like vacation pay, social security, and other mandatory benefits don't apply. With independent contractors, you are only paying for casual or temporary labor.

6. Less work for the Human Resources team

The Human Resources department will also not have to worry about most of the processes involved in hiring employees. For example, Human Resources plays a key role in closing the relationship between the manager and the employee.

The independent contractor agreement states the specific job required with a dictated timeline. Onboarding is also short or non-existent. There is no management of sick days and vacation times. Overall, your HR team is not as burdened as they would be if you hired employees.

7. No need for further training

The no-requirement of training contractors is also one of the many contractor benefits. Independent contractors are hired based on their qualifications. This includes required training, documentation, and general proof of skill in particular fields.

Having these documents means they no longer need training and mentorship, which are usually needed by employees.

8. Requires minimal to no supervision at all

An employee and an independent contractor may perform the same amount of work and perform the same tasks. However, employees may give their employers more workload as most still need supervision, training, or extra help. Independent contractors require minimal supervision, if any.

Since independent contractors are paid if they finish a certain job in a specific time, you don't have to manage them. You also don't have to micromanage, as how they complete it is not up to the business owner. With independent contractors, there is no micromanaging, but you still get the results that you want.

9. Less administrative work for the company

Processing the documents for contractors is also simpler than it would be with employees. The administrative work boils down to drafting the contract and paying their invoices. You don't have to bother with timesheets, payroll, and tax declarations like you would when hiring employees.

10. No further legal implications of hiring in your country or abroad

Hiring independent contractors rather than employees can also be a solution to hiring globally or in another country. While you can easily hire employees globally with the right EOR service, you might not be comfortable hiring them as employees.

When hiring contractors from abroad, you don't have to worry about international compliance. As contractors are responsible for their taxes and benefits, you don't have to navigate global payroll.

Should you hire independent contractors?

Mastering both of these workers’ pros and cons will help you decide which type of worker is a better fit for your company. More importantly, it will give you a better idea about who is more appropriate for the jobs and positions your company is offering.

It may seem that a company may be paying more for independent contractors. Still, when you assess it, there may be fewer costs involved when hiring independent contractors.

When conducting business in your country or abroad, you should always see through the rules, labor laws, and other regulations. Make sure to be compliant with all of these rules and be mindful of employee misclassification and false self-employment.

Hiring independent contractors over employees has its advantages, especially if the employer is more interested in achieving short-term goals. However, if a company’s goal is centered around growth and a vision in the long-term, hiring employees is by far the better choice. Unlike independent contractors, employees share a common vision as you, but they may be costly in the long run.

FAQ

What is a 1099 employee?

1099 employees are basically self-employed workers or independent contractors. 1099 contractors use the 1099 form to detail their income on their tax returns. 1099 employees or independent contractors receive payments under the terms of conditions of their contract.

What is the difference between a consultant and an employee?

Employees are individuals who work exclusively for a particular company. Consultants determine their own work schedule in completing their assigned tasks and responsibilities. Consultants may have multiple clients and can market their services to different companies.

Is it better to hire employees or independent contractors?

There is no definite answer to this question, as deciding which worker category to hire depends entirely on your company. If you want the worker to help you with long-term goals, then you may be advised to hire employees. However, if you are more into solving short-term projects, then hiring independent contractors may be the better choice for you.