Global employment guides

10 Benefits of Hiring Independent Contractors Over Employees

Published on:
December 20, 2022
Written by:
Lucas Botzen

No commitment. No unnecessary expenses on insurance and benefits. No strings attached. These are only some of the obvious benefits of hiring independent contractors. But is it really a wise decision to hire independent contractors when planning to achieve long-term goals?

Table of contents

The past year significantly changed how companies perform business. Work trends in the business industry have also evolved into a more technology-dependent dynamic. These include the sudden move toward a more remote work setup, the balloon of freelance workers, and the advances of technology that helped shape how employees, namely self-employed contractors and independent contractors accomplish their responsibilities.

Interestingly, independent contractors have helped curb costs in so many ways. But are they really worth hiring? Here are the top 10 benefits of hiring independent contractors that you need to consider for your business:

1. Lesser costs

Companies are always looking for ways to cut costs, increase productivity, and hire contractors. Here are some expenses that are crossed out when a company hires contractors instead of employees. 

  1. Payroll taxes
  2. Insurance
  3. Overtime pay
  4. Office supplies and equipment
  5. Bonuses

2. You are working with experts

When hiring independent contractors, you will be expecting a set of independent workers who have great expertise in their respective crafts. Relative to employees who, most of the time, require training and mentorship from their commanding officers, independent contractors are not entitled to these services. Hence, as an employer hiring independent contractors, you shall count on individuals who are already skilled and learned what they applied to perform for your company. 

3. No lags and higher efficiency 

Another salient benefit of hiring contractors is the reduced lags and better efficiency. Hiring independent contractors comes on a needs-basis principle. In other words, your independent contractor is hired because of their qualifications and expertise, so you have the right to what needs to be done by the contractor. This process skips the usual onboarding process of an employee and any training that the usual employee must undergo to attain the requirements needed to do a specific job. 

4. Lesser or no overhead expenses

Since there are no communal spaces to be used as offices, no equipment or tools to be provided, and other expenses that a business can incur, as with having employees, the company does not have to worry about these overhead expenses. Independent contractors are also independent business owners to have their own office, equipment, tools, and trained people to work on your contracted job. 

5. No employment benefits to consider

Another essential factor to consider in the independent contractor versus employee debate is the responsibility of providing employment benefits to employees, which is nonexistent when you hire independent contractors. Regarding the finances, hiring independent contractors will be far more advantageous to your company as benefits usually given to employees are not always provided to contractors. Yes, employment benefits are not the same as contractor benefits. 

Employment benefits like vacation pay, sick leave, retirement benefits, social security, worker’s compensation, healthcare, overtime, and unemployment benefits will no longer be considered because you are only paying for casual or temporary labor. 

6. Human Resources will not be dealing with employee termination 

The Human Resources department will also not necessarily be responsible for the termination of an independent contractor, in contrast to employee termination, where Human Resources plays a key role in closing the relationship of the manager and the employee. The independent contractor agreement states the specific job required with a dictated duration of time to be finished. Included in this agreement are other points where it provides the company the ability to terminate with ease if the other party does not comply with one or more of these items.

7. No need for further training

The no-longer-requirement of training contractors is also one of the many independent contractor benefits. Independent contractors are hired based on their qualifications. This includes required training certifications, documentation, and general proofs of being skilled in particular fields. Having these documents with them will prove that they no longer necessitate training and mentorship, which are usually enjoyed by employees.  

8. Requires minimal to no supervision at all

An employee and an independent contractor may perform the same amount of load and tasks. However, employees may give their employers more workload as most of them still need supervision and chastising when they are performing the tasks wrong. Independent contractors require at most minimal supervision if any. Since independent contractors are paid to finish a certain job for a specific time, how they complete it is not the primary concern of the business owner. There is no micromanaging but still getting the results that you wanted. 

9. Less administrative work for the company

Processing the documents for contractors such as independent contractor payment rights, timesheets, payroll, tax declarations, onboarding is also way less exhausting when compared to the administrative work that need to be performed when hiring employees. This is not only a benefit for employers but also for the independent contractors themselves, as having to fulfill such piles of paperwork will be stressful. 

10. No further legal implications of hiring in your country or abroad

Choosing to hire independent contractors over employees is also advantageous considering the legal implications the employer may have to face when hiring either of them. Hiring independent contractors provides an easier way to navigate complex labor laws in multiple countries where your company conducts business. 

More about Independent Contractors

“What are the advantages of hiring independent contractors?” is a question more and more hiring managers ask. The truth is, the advantages of hiring independent contractors go way beyond just financial expenses. Having independent contractors rather than regular employees in your team also greatly reduces your paperwork and other employer responsibilities. You, as the business owner, should distinguish between the employee and the independent contractor. Mastering both of these workers’ pros and cons will help you decide which worker is more fit in the system and environment in which your company is operating. More importantly, it will give you a better idea about who is more appropriate for the jobs and positions your company is offering. 

According to your business needs, you will know which way you should go. It may seem that a company may be paying more for independent contractors. Still, when you assess it, there may be more costs, both tangible and intangible, that are lessened or altogether eliminated when hiring independent contractors.

When conducting business in your country or abroad, you should always see through the rules, labor laws, and other regulations that might affect your hiring and employment processes. Be sure to be compliant with all of these rules, and do not forget to secure an independent contractor agreement to state your working relationship and expectations clearly. 

Most companies may have been accustomed to hiring regular employees. There is nothing wrong with that. But remember that when hiring independent contractors, your company will be more cost-efficient and productive because you only pay the job needed without incurring other costs. (READ: Remote Independent Contractor vs Remote Employee)

Talk to us and see how Rivermate can help you with your independent contractors.

Moving Forward

Hiring independent contractors over employees has its advantages, especially if the employer is more interested in achieving short-term goals. These advantages include lesser expenses and paperwork, but more than these, the possibility of incurring legal implications is also minimal compared to when traditional employees are hired. However, if a company’s goal is centered around growth and a vision in the long-term, hiring employees is by far the better choice. Unlike independent contractors, employees share a common vision as you, and they tend to be loyal when treated well by the company. Nevertheless, whether you decide on hiring an independent contractor or an employee, one thing is universal—being transparent and lenient to your workers will always make them want to work for you. 

Frequently Asked Questions

What is a 1099 employee? 

1099 employees are basically self-employed workers or independent contractors. 1099 contractors use the 1099 form to detail their income on their tax returns. The 1099 form is a report that independent contractors receive throughout the year to the Internal Revenue Service for tax purposes. 1099 employees or independent contractors receive payments under the terms of conditions stipulated in their contract. Note that these reports may not be necessary for contractor jobs that are paid only minimal amounts. Independent contracting in the United States, for example, only requires a report to be submitted to the Internal Revenue Service for businesses that pay more than $600 in one year. 

What is the difference between a consultant and an employee? 

Employees are individuals who work exclusively for a particular company. Consultants determine their own work schedule in completing their assigned tasks and responsibilities. Consultants may have multiple clients and can market their services to different companies, which is in contrast to employees who provide their services exclusively to a single client on a long-term basis. One trick to quickly tell the difference between a consultant versus an employee is to remember that consultants are self-employed while employees are not. 

Can independent contractors work at home? 

Absolutely. Most home-based jobs are independent contractor jobs rather than employee jobs. As a work-at-home independent contractor, your paycheck will not be deducted from taxes, so it is your responsibility to keep track of your tax liability and plan and save accordingly to make such payments. 

Is it better to hire employees or independent contractors?

There is no definite answer to this question because the truth is, deciding on hiring whichever category of a worker depends entirely on the contingencies faced by your company. As with every other business-related decision, there are pros and cons to hiring an employee or hiring an independent contractor. If you aim for long-term goals, then it may be advised that you hire employees who share the common vision as you and are far more loyal than independent contractors. However, if you are more into achieving short-term goals, then hiring independent contractors may be the better choice for you, considering they require fewer expenses. 

Do independent contractors pay more taxes than employees?

Independent contractors are usually paid more than employees because companies are more willing to provide them bigger salaries. Hiring independent contractors will also make employers avoid the stress of entering into expensive and long-term commitments, which is usually the case when hiring employees. That said, employees pay more taxes for health benefits, unemployment compensation, Social Security taxes, Medicare taxes, and others. 

What are the advantages of being a 1099 contractor? 

The advantages of being a 1099 contractor or a self-employed contractor include paying fewer taxes than the traditional employee. Deductions like business mileage, meal deductions, home office expenses, work phone, and internet costs are no longer paid for by the 1099 contractor, which is financially advantageous. Of course, this is aside from the benefits like having a flexible schedule, not being required to commit to a single client, and being your own boss. 

What is the difference between being self-employed and an independent contractor?

Being an independent contractor is already being self-employed. “Self-employed” is an umbrella term for individuals who still earn money but do not necessarily work as employees for anyone. 

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