Hiring the right help for your business can be confusing and intimidating.
Very often, entrepreneurship starts as a solo venture or a partnership. But as the business expands, keeping up with client demands can be too much for any business owner to take on themselves. This is actually a good problem to have. Unfortunately, not everyone knows when it’s time to bring in extra help. The simple answer? If you are losing business, you need to make a change. Depending on your situation, however, hanging a “now hiring” sign may not be necessary. While hiring employees can certainly help, are they the right kind of help? With an evaluation of your needs, you can decide if hiring a freelancer, contractor or employee is right for you.
Fundamentally speaking, the major differences between freelancers, contractors and employees lie in their relationship with the business owner. Freelancers and contractors are self-employed individuals, while employees are hired by the company. Freelancers and contractors typically set their schedules based on the needs of their clients and work out a payment schedule (typically upon completion of a job). Employees, however, work the schedule established by the company and receive a regular paycheck on a schedule set by the company. As a business owner, you are responsible for tax reporting on any payroll employees you have. But since freelancers and contractors are considered self-employed, they are responsible for reporting their taxes.
Sometimes people will use the terms “freelancer” and “contractor” interchangeably, but there is a difference in the type of professional you are hiring. Freelancers usually work on smaller, short-term projects, while contractors work on larger, more long-term projects.
Before deciding if hiring a freelancer is a viable option for your business, it’s important to understand exactly what a freelancer is. Freelancers are people the IRS considers to be self-employed, meaning there is no need to onboard them as “official” employees. They are responsible for reporting their earnings and taxes. Since they are not payroll employees, there is no expectation for benefits.
Freelancers are typically the best in their field and passionate about what they do. Depending on the work you need to be done, freelancers can give your business a boost, and potentially save you money. Freelancers are a great option for your business when all you need is short-term help. Consider a relationship with a freelancer if you have the following needs:
Freelancers and contractors share many similarities, but they serve entirely different purposes. While you may hire freelancers for small projects, contractors take on more heavy lifting. If your business needs services for advertising beyond maintenance of social media accounts, for example, contracting a marketing company to handle the job is your best bet. They come with a team of expert professionals who can get you the exposure you need.
Contractors also handle specialized projects, such as IT, remodels, design and consulting. As your business grows, financial consultants can keep you on track with your financial goals. Hiring a contractor will help your business in the following areas:
Related: Hiring an Independent Contractor
Not every company needs employees or a large number of employees. Depending on the type of business you run, this is an important question to ask yourself. Is all of your business conducted remotely with little collaboration? Freelancers can be an invaluable resource. However, if you hold frequent meetings, rent an office space or interact with customers, you will want reliable employees to help support the business.
Remember, it’s important to find the right people. Just because someone looks good on paper doesn’t mean they are a good fit for your business. They must fit into your company’s culture. Here are some important considerations when hiring employees:
The IRS has its own definition and classification for freelancers, contractors and employees. This gives each individual — and the business owner hiring them — specific responsibilities with tax reporting. Talk to an advisor to make sure you understand your responsibilities as a business owner when working with each classified individual.
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