{"id":15551,"date":"2017-08-31T00:00:00","date_gmt":"2017-08-31T00:00:00","guid":{"rendered":"http:\/\/blog.toggl.com\/contract-vs-full-time\/"},"modified":"2024-06-21T11:55:24","modified_gmt":"2024-06-21T11:55:24","slug":"contract-vs-full-time","status":"publish","type":"post","link":"https:\/\/toggl.com\/blog\/contract-vs-full-time","title":{"rendered":"Contract Vs Full Time: Pros & Cons For Employers & Employees"},"content":{"rendered":"\n

Today\u2019s business leaders eventually all end up facing the contractor vs. full-time employee dilemma.<\/strong><\/p>\n\n\n\n

Experts anticipate the U.S. workforce will be 40% contract workers and freelancers<\/a> by 2020. If you only hire one type of employee, you could be missing out on some valuable opportunities.<\/p>\n\n\n\n

If you only hire contractors, ask yourself: \u201cWhat\u2019s full time got to do with it? In fact, what is a full-time employee, really? Would hiring a stable staff help my business expand?\u201d<\/em><\/p>\n\n\n\n

If you only hire full-time employees, you may be wondering: \u201cWhat is a contractor job? Are these employees right for my company? Can they help fill in key gaps? Should I hire contractors during high-volume times of <\/em>year?\u201d<\/em><\/p>\n\n\n\n

To determine which employment structure best suits your business, you need to understand the nuances of these employment structures.<\/strong> Like everything else, the devil is in the details.<\/p>\n\n\n\n

Contractor Salary Pros\/Cons<\/strong><\/h2>\n\n\n\n

In today\u2019s low-minimum-wage environment, many people use contract work to earn higher hourly wages \u2013\u00a0at least for some of their work hours.<\/p>\n\n\n\n

Businesses benefit by hiring employees only when they need them; Contractors (including temps, freelancers, etc.) benefit by gaining better pay, at least in the short-term. <\/strong><\/p>\n\n\n\n

A simple way to determine if someone is a contractor is to ask, \u201cHow many people employ this person?\u201d<\/em> If they have over three employers, they\u2019re probably a freelancer.<\/p>\n\n\n\n

Hiring a contract employee requires a far different pay structure than bringing someone on full-time, meaning you need to embrace a unique set of trade-offs. <\/strong><\/p>\n\n\n\n

Because freelance employees handle their own taxes, benefits, and marketing costs \u2013 they typically charge more than in-house employees. Also, the short-term nature of their employment doesn\u2019t create loyalty.<\/strong><\/p>\n\n\n\n

If your competitors offer your freelancers higher wages or better job security, you could find yourself looking for new talent on a regular basis.<\/p>\n\n\n\n

Freelancers and contractors typically show the same dedication to quality of work as employees. However, they don\u2019t have the same level of loyalty to one employer.<\/p>\n\n\n\n

These workers want to do an excellent job, impress their temporary employers, and move on to serve other clients.<\/p>\n\n\n\n

For many companies, the ease of not providing benefits, withholding income taxes (which still must be reported), or paying unemployment taxes\/Social Security greatly outweighs the higher flat-rate and hourly rates freelancers and contractors charge.<\/p>\n\n\n\n\n\n

<\/p>\n\n\n\n

Freelancers and contractors offer one unique quality that few full-time employees can: diverse work experiences.<\/strong><\/p>\n\n\n\n

Sure, you can hire older workers with a wealth of knowledge in your industry \u2013 but do they really understand recent trends and technologies? <\/strong><\/p>\n\n\n\n

Freelancers and contractors who work with your competitors can give you insights into best practices (within ethical boundaries, of course).<\/p>\n\n\n\n

If they serve businesses in other niches, they can hip you to innovations that may be entirely new to your industry<\/strong> \u2013 giving you a serious competitive advantage!<\/p>\n\n\n\n

Full-Time Salary Pros\/Cons<\/strong><\/h2>\n\n\n\n

Conversely, if you operate a small business and only hire contractors, you may be wondering, \u201cWhat is full-time employment? Is it right for my business?\u201d<\/em><\/p>\n\n\n\n

Unlike contract employees, full-time employees depend more heavily on their employers. For this reason, they enjoy more legal protections.<\/p>\n\n\n\n

Putting a person on your payroll makes them an employee, not an outside contractor. If you work with someone in the long-term, oversee their work methods, and report their taxes, they\u2019re an employee.<\/p>\n\n\n\n

Full-time workers trade off less flexibility for greater job security (though employers can provide certain perks like 9-80 scheduling).<\/p>\n\n\n\n

They often show dedication to their employers, advocate for them in their social circles, and work for the long-term benefit of these businesses.<\/p>\n\n\n\n

Not only do full-time employees show a greater level of dedication to one employer than contractors, they also tend to stick around.<\/strong><\/p>\n\n\n\n

If you find yourself hiring people for the same tasks on a regular basis, ask yourself if you could benefit from the lower turnover<\/a> (and hourly rates) of regular employees.<\/p>\n\n\n\n

Of course, one of the less-obvious (but very important) benefits of long-term employees is a sense of family and community.<\/p>\n\n\n\n

If you run a local business that serves a local market, this can be crucial to your success. Your long-term, dedicated employees have a stake in your company<\/strong> and attract their friends and family members to your business.<\/p>\n\n\n\n

In short, full-time employees are a marketing investment.<\/p>\n\n\n\n

Contract vs. Full-Time: The Legal Framework<\/strong><\/h2>\n\n\n\n

The IRS levies severe penalties against businesses that misclassify employees. Know the law<\/a> in your particular industry and consider these common IRS tests for employee status:<\/p>\n\n\n\n