Pros and Cons of Hiring Contractors vs. Employees

Nicole Whitney
Posted: August 16, 2018

One of the biggest hurdles you’ll encounter when expanding a business is the age-old question: Which should I hire — contractors or employees? The answer may be simple. If you need someone with a specialized skill set for a short period of time, then staff augmentation or, as we like to call it — Innovators on Demand™— is your best option. However, the answer isn’t always so straightforward. Here’s some food for thought when weighing the pros and cons of hiring contractors vs. employees.

Related: Is Staff Augmentation Right for Your Learning Organization? [+Quiz]

Pros of Hiring Independent Contractors

The big one is the potential cost savings. The cost to hire an employee is not just a salary; there are also benefits, taxes, and training to consider, which you are not required to offer to a contractor. No PTO, health insurance, retirement, or employment taxes — you pay only for the services provided. A contractor may require a higher rate of pay compared to their employee counterpart’s salary, but when the true cost of hire is tallied, the employee will be the higher priced investment.

Another advantage? Contingent workers are experts in their field and typically don’t require training. They are the “Extra Hands You Don’t Have to Hold™” — able to plug in effortlessly and dive right in. Bonus: Once the job is done, there is a seamless roll off with no further compensation required.

Contingent workers are experts in their field and typically don’t require training. They are the “Extra Hands You Don’t Have to Hold™”. Click To Tweet

Cons of Hiring Independent Contractors

On the flipside, you must consider how staff augmentation will impact your culture. Will this disrupt your workforce? One of the disadvantages of bringing on contractors is that you have less control. Contingent workers have autonomy on how they handle any given task. At ttc, we strive to overcome this challenge through our onboarding strategies and dedication to continued mentorship.

And finally, you must be aware that misclassification of employees as contractors will cause you big problems with the IRS. Do not overlook the importance of treating your contractors as contractors (not as employees).

Pros of Hiring Employees

It’s all about the three C’s:

  • Culture — Employees are team players who will contribute most to your company culture.
  • Consistency — Employees provide operational consistency, which is critical to running a business smoothly.
  • Commitment — Employees are loyal and in it for the long haul.

Other perks of hiring employees include:

  • The ability to supervise, mentor, and ensure specifics processes are followed
  • The potential long-term savings of retaining employees, especially for positions that are a constant need

Cons of Hiring Employees

One of the biggest disadvantages of hiring employees is the initial cost of hire. As previously mentioned, it’s not just a salary. It’s a salary + benefits + taxes + training + equipment and so on. The legal risks and potential for lawsuits are also higher — the words “employment discrimination” and “wrongful termination” will send a shiver down the spine of any HR professional. And lastly, if your demand for additional resources is uncertain, can you keep a workforce of employees afloat during the “down season”? Or would it be more cost effective to bring on Innovators on Demand™ just for the moment of need?

Understanding your business needs and weighing the pros and cons of hiring contractors vs employees will help you make the right hiring decisions.

If you’re convinced that the pros outweigh the cons for hiring contractors, or you’re simply curious to learn more about the benefits of staff augmentation for your learning organization, try out our Innovators on Demand™ risk free! New clients can get 20 hours free toward staffing needs. Contact Debbie today for your “Extra Hands You Don’t Have to Hold™”!


About the Author

Nicole is a Human Resources professional with expertise providing small business HR solutions that span strategic sourcing and recruitment to communication strategy. She is the newest Innovator to join the ttcInnovations team where every day she strives to enhance productivity, improve operations, and ensure success across the recruiting and hiring process. Her HR philosophy is to be informed and present. She is a proud Minnesotan, an avid reader, a mini-goldendoodle lover, and an enthusiast for summer nights spent in the backyard with family.