16 Benefits of Hiring Contractors vs Employees

By MBO Partners | July 4, 2023

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Key Points

A blended workforce that includes independent talent can truly give enterprises a competitive upper hand.

Outsourcing work to independent contractors is often much more cost effective than hiring a permanent employee.

With a virtual bench, independent talent can be quickly deployed as soon as project needs arise. 

Hiring independent contractors over full time employees comes with many benefits. Today, more than 51 million people have chosen to work independently rather than have a permanent, full-time job. And most independent contractors are very satisfied with the flexibility and creativity their career path affords. Most plan to remain independent and even build a larger business.   

The hiring game is tough right now, so this is good news for employees. Rather than focusing on building a workforce of traditional, long-term employment, a blended workforce that includes independent talent can truly give enterprises a competitive upper hand. Here are 16 benefits of hiring independent contractors.  

1. Increased Flexibility 

While finding a skilled, full-time employee is great, there can be a high cost of continued employment. Outsourcing work to independent contractors is often much more cost effective than hiring a permanent employee. Once a project is complete, independents move on to their next contract—you’re not on the hook for continued employment.  

 2. Access to In-Demand Skills

Workers in nearly every specialty are moving away from traditional employment and towards an independent contracting model. The independent contractors you will engage for projects or specialized work have a wealth of in-demand skills. Remember, independents have built a career out of being experts in their industry. These are workers whose talent is highly sought after, especially in competitive areas such as IT, marketing, engineering, biotechnology, and consulting. 

3. Competitive Advantage

Hiring independent contractors gives enterprises staffing flexibility, allowing them to staff up or down according to current goals and growth. This can make businesses more agile and competitive among their peers while bypassing the expense of recruiting, hiring, and training an employee for the same work. 

4. Cost Savings

Hiring an independent contractor over an employee can lead to many financial benefits. First, because independents are their own business entity, they are responsible for providing their own benefits and paying both the employer and employee portion of Social Security and Medicare (FICA). Second, independent contractors are experts in their respective fields. Engaging an independent can help companies save both time and money on training, onboarding, and managing a full-time employee. Third, by moving recruiter functions in-house, companies can save on costly markups from third-party staffing or consulting firms. 

5. Reduced Onboarding Time

Technology can help businesses tailor the onboarding process to fit their and streamline traditional procedures such as background checks, contract review, and compliance tasks. This can help independents move through the process more quickly, thoroughly, and efficiently.  

6. Corporate Agility

Independent contractors allow companies to respond with flexibility to meet market demands. Engaging independent contractors for projects that require specific skills or additional resources allows companies to access in-demand skills, get to market faster, better manage turnover, and have flexibility in cost models.   

7. Fast Talent Re-Engagement

One of the biggest benefits of independent talent is the ability to re-engage them for future needs. Independents who have already worked with your company know how projects run. And, since they have already been through the onboarding process, re-engagement is often much faster.  

To take this a step further, companies can create virtual benches of talent. A virtual talent bench is a group of independent talent who have already performed all onboarding steps including background checks, work arrangement validations, equipment assignments, etc. prior to a role being offered. With a virtual bench, talent can be quickly deployed as soon as project needs arise.

8. Increased Efficiency

When you lower costs and have faster access to talent, you move faster. Independent contractors help companies to become more agile—increasing supply chain control and boosting overall efficiency.

9. Increased Productivity

Independent contractors are given specific project goals when they are hired. Because their job is to focus solely on solving problems and identifying and implementing a solution, they tend to reach these goals faster than traditional workers.  

10. Reduced Overhead Expenses

Overall, independents tend to be very cost-effective resources because they can be engaged for a set period of time and can contribute specific expertise that may be difficult to recruit for or find among your current base of employees. Once you have a system in place to hire, engage, and manage independent contractors, there are minimal overhead expenses associated with continuing to build your pool of contingent workers. 

11. No Employment Benefits

There are many financial benefits to engaging independent contractors, including not having to provide traditional benefits such as health insurance, stock options, or retirement plans. Independents also do not receive the same legal protections—unemployment, anti-discrimination, and Workers’ Compensation—as employees. Nevertheless, it is good practice to ensure independent contractors have basic insurance requirements built into their contract to protect against any legal issues. 

12. Project-Based Engagement

Using an independent contractor for a project rather than investing the time to hire an employee with the same skills, simply makes more sense for many companies. Independents operate as their own business, completing the work outlined in their contract for a client. Once the project is complete, the independent contractor moves on to their next job. There’s no dealing with discussions of continued employment or termination.  

13. Minimal Management Required

Because independent contractors are their own business entity, it is up to them to decide how, when, and where they complete the work outlined in their contract. While they will report to a manager, they need much less oversight than a traditional employee.

14. Reduced Administrative Work

Initial onboarding procedures such as background checks, contract review, and compliance tasks can be streamlined with software by outsourcing onboarding to a company like MBO. You can automate tasks like background checks, payment, and engagement documentation.

15. No Required Training

One of the downsides to hiring a new employee is the amount of time it takes for them to learn their role. Independent talent, on the other hand, are already experts. There’s no training needed. This greatly reduces onboarding time, which is helpful for managers and gets projects started faster.

16. Access to a Global Talent Pool

Technology like talent marketplaces enable a transaction between client and independent contractor directly online, eliminating the need for a third-party staffing agency or consulting firm. An independent contractor can fill out a profile and then apply to or be matched with projects that fit their skill set. On the other end, enterprise managers can post opportunities for available talent, and then evaluate and engage the right person. This gives enterprises access to talent across the globe. 

In order to achieve workforce agility and realize the benefits of hiring contingent talent, it is important for companies to create a program to manage how independent contractors are hired. A centralized engagement program helps enterprises compliantly find, engage, and manage independent talent using direct sourcing.  

Direct sourcing allows managers to find independent talent directly, rather than having to go through a third party. Along with a centralized program, a direct sourcing strategy can help your company remain compliant, strategically manage independent contractor spend, and boost work efficiency. 

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