In the age of the gig economy, the independent contractor pool has never been so vast and rich with eager talent from around the world just waiting for the chance to strut their stuff.
Despite Covid-19 having dished out devasting blows to most economies – the emerging gig market grew by more than 33 per cent in 2020. As a result, around 34 per cent of the US talent have now hopped on board the flexible-working-live-better train and it does not look like they will be getting off any time soon!
If the number of independent contractors is growing by the day, someone has got to be hiring them, right? Yep! Take one look at platforms like UpWork or Fiverr and you will find a host of jobs for almost every industry type. Plus, many employers find that hiring independent contractors is an easier, more affordable way of getting the best work at an affordable price and usually obligation-free.
But like the saying goes…when it sounds too good to be true, it usually is!
Is hiring independent contractors all that and more or could you be playing with fire? Read on to find out the pros and cons of hiring independent contractors.
The Pros of Hiring Independent Contractors
There are several advantages to using independent contractors rather than permanent employees, and saving money usually tops the list!
Although most employers pay contractors more per hour, some benefit from a low exchange rate depending on where the contractor is based. On the other hand, costs like equipment, internet, office expenses and other employee benefits are almost eliminated.
Other benefits include:
- Flexibility: This especially works in the favor of businesses that have fluctuating workloads. You can hire a contractor for a specific project or for a certain time frame.
- Greater efficiency: Some businesses find that contractors can be more efficient as they could specialise in specific areas of their business. This eliminates the need and cost that are often set aside for training and education.
- Less legal drama: Hiring full-time employees requires proper compliance and onboarding to be followed. Furthermore, if you find yourself unhappy, some procedures need to be followed before you can dismiss an employee. These complexities usually do not exist with independent contractors.
Disadvantages of Using Independent Contractors
After reading about the advantages of hiring independent contractors, you may be re-thinking ever hiring a full-time employee again. But there are also some significant drawbacks that you may want to first consider.
- Ever heard the saying ‘the taxman, never sleeps’, well, it has once again proven to be true. A common and often dangerous misconception that some independent contractors have is that they can escape paying taxes. Wrong! Freelancers and independent contractors are still liable for taxes in their country of origin. While businesses are under no obligation to contribute to these taxes, it should be made clear in a contract to avoid possible problems.
- Government and federal agencies are likely to impose more regular, stringent audits on your business if you hire independent contractors on the regular. This is mainly because the more full-time employees you have, the more tax and insurance you pay and it becomes harder for employees to hide or downplay their income.
- Value: A permanent employee will usually be more invested in the growth and success of your company than an independent contractor would. If you find the perfect contractor and use them regularly you could also risk making it look like they are a permanent employee of whom you should b paying taxes and insurance.
- Contrary to popular belief, you cannot hire and fire independent contractors as you please. This is where the importance of a sound contract comes into play (yes, you cannot escape the paperwork!). Your right to terminate service is limited by the terms stated in a contract. If you choose to simply dismiss a contractor, you could violate your agreement.
- You may not own the copyright: If you hire an independent contractor to create work that can be copyrighted you might not be legally considered the owner unless it is stated in a written agreement that transfers copyright ownership from the independent contractor to you. On the other hand, if an employee creates such a work, in most cases you will automatically own the copyright.
Global Recruitment Without the Shortcuts
Navigating the world of new-age employment and recruitment can be tricky. If you get it right, you and your business are well on your way to success, if you get it wrong, you may pay with your reputation or hard-earned cash. Why take the risk? Being OGs in the recruitment game, Playroll can take care of your recruitment process and ensure that you do not land into any hot waters along the way.
Contact us today for a demo!