Pros and Cons of Hiring an Employee or an Independent Contractor

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Wesleyan University
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The bookkeeper here executes his/her duties at the business location, the owner, in this case, instructs the bookkeeper when to work, what to work on. Moreover, the bookkeeper uses the business equipment i.e. computer and software in this case. In addition to that, the owner of the business controls when and how the bookkeeper gets his/her payments. It is evident that the owner here has both behavioural and financial control over the bookkeeper. Terms and timeframe, in this case, are clear for the work that the bookkeeper is performing. Equipment used may belong to the business, but the specification of duration and pay makes the bookkeeper an independent contractor. There is no control towards the employed person as exhibited by the owner. In this case, the manager expects the accountant to learn from other workers after which he/she earns a flat fee of an unspecified amount. The period for which the accountant performs the task may not be specified. However, he/she carries out a continuous task so long as the business is in place which makes them an employee.

Pros and cons

Usually, there are both benefits and shortcomings of hiring either an employee or an independent contractor. Many of small business entrepreneurs wish to do away with the extra overhead of having a slew of workers but sometimes have no alternative. In an employee situation, there is an extra mile exhibited by an employee. This is because all most people want is security and satisfaction of a place they can term as home. When an employee gives them security, they tend to go for an extra mile an advantage to the employer. An employer pays less in the form of wages when they have an employee. Since there is job security, hourly wage for such an employee will be less. Where there is workload increase, an employer needs not struggle or scramble to find help. Help is readily available in this case. Delegation of duties is possible where one has employees Klandermans, & Van Vuuren, (2010). In fact, it can be permanent which makes sure that the employer doesnt have to perform the complete tasks by on their own which frees up some time to help one perform tasks that they are best suited for. Continual training is not necessary in the case of employees situation. They can execute duties without prior direction on how to perform a particular task because they know their employer. Taking vacations is possible since an employer need not worry about how the firm is running since employees can take care of that in the absence of the employer.

On the other hand, there are shortcomings involved in having employees. Firstly, though it is not mandatory, most employees expect benefits such as vacation and health care. Here, potential candidates when undergoing an interview, tend to look for other companies offering the same benefits. Another shortcoming associated with employees is time-consuming. Hiring employees can be slow as well as intense. Where an employer is not great at hiring, the whole process can be a source of frustration. Lastly, employees get their due regardless of whether they executed their duties or not. Sometimes employers pay their employees even for shoddy work.

For an independent contractor, the employer saves money overall although they pay a lot per job or hour, this is because an employer needs not pay any benefits and also doesnt have to commit to salary. Flexibility is another advantage that comes with hiring independent contractors. If a contractor is not a good match, one can decide not to rehire them. Training of contractors is not necessary since independent contractors have many years of experience which is a benefit to the employer who will contact someone with specialized service. Jost, M. (2011) observes that companies are not tied to contractors welfare since they, contactors, are responsible for their permits and professional licenses.

While hiring independent contractors has a lot of advantages, there are shortcomings as well: Loss of some control over how they perform their work because employers cant closely monitor them. Employers can guide them, but generally, they will execute the work in their absence which makes them run their business their way. Also, they will promote their brand and not employers since they perform their work under their company name, with own logos, etc. Finally, contractors own all copyrights unless there is an agreement between the two.

Legal Liabilities

In the federal law, employees and contractors have legal obligations. In the employees case, it is the duty of the employer to ensure that all staffs are working in a safe environment and that they have permits and professional licenses. Employers also have federal tax obligations where the employer needs to pay for the employees taxes. Federal law covers all workers minimum wage, child labour, overtime, insurance and equal pay for equal work, Morgan, J. (2015). On the other hand, the business is not responsible for such payments. An employer is lawfully responsible for the carelessness of their employees, but in an independent contractor, they are not. An independent contractor is also responsible for professional licenses and permits.

Consequences of Misclassifying Employees

Misclassification of employees in business results to financial liability, employees rations problems, legal claims and administrative headaches. Several bodies challenge employees misclassification. They include; state tax agencies, IRS, state antidiscrimination agencies, the Equal Employment Opportunity Commission (EEOC), etc. according to the law, an employer should pay statutory taxes for their employees. In many cases, smart employers evade taxes by this misclassification where they classify employees as independent contractors. According to Alexander, C. (2016), Federal Insurance Contributions Act (FICA), expects employers to suffer dire consequences because for misclassifying their employees. The results include taking care of past taxes. They will pay for all the time worked by the employees, failure to which may call for possible fines and legal suits


Alexander, C. (2016). Misclassification and Antidiscrimination: An Empirical Analysis.

Jost, M. P. S. (2011). Independent Contractors, Employees, and Entrepreneaurialism under the National Labor Relations Act: A Worker-by-Worker Approach. Wash. & Lee L. Rev., 68, 311.

Klandermans, B., Hesselink, J. K., & Van Vuuren, T. (2010). Employment status and job insecurity: On the subjective appraisal of an objective status. Economic and Industrial Democracy.

Morgan, J. (2015). Liability For Independent Contractors In Contract And Tort: Duties To Ensure That Care Is Taken. The Cambridge Law Journal, 74(01), 109-139.

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