Independent Contractor vs Employee: Which Should I Hire?

By MBO Partners | September 3, 2020

Independent Contractor vs Employee img

In our modern workforce, there are many options for finding and engaging talent. You can hire temporary workers to fill a seasonal or short-term need, full-time employees to support core organizational goals, or independent contractors for high-value projects. 

While there are rules and regulations that govern the engagement of each type of worker, there are also practical applications to consider. All of these types of workers can fulfill a role in your company, but there are many times where the best talent for the job is an independent contractor.

Independent Contractor vs Employee vs Temp

Before you decide which type of worker to engage, learn the differences between each. Here some key differentiators.   

full time employee vs temp vs independent contractor

Full-time employee

  • Works for a single employer
  • Employer dictates and controls the work performed
  • Employer determines hours and location of work
  • Is on payroll
  • Entitled to company and legal benefits of a W-2 employee

Temporary employee

  • May be hired directly or retained through a third-party intermediary such as a staffing agency
  • May be seasonal or part-time
  • Can participate in employer’s pension plans after performing 1,000 hours of work in a 12-month period
  • May count towards total number of employees considered when determining whether or not an employer is covered by certain laws such as the Family Medical Leave Act (FMLA)

Independent contractor

  • Operates as an independent business
  • May have their own business name
  • May perform work for multiple clients
  • Submits invoices for completed work
  • May actively and openly market their services
  • Provides their own tools and equipment
  • Works when and where they like
  • Responsible for both individual and employer side of taxes (FICA)

What Type of Worker Should You Hire?

When considering whether or not to engage an independent contractor versus a temporary or full-time employee, consider the following questions:

  • Is the project an ongoing business need?
  • Is the project or work a core competency of your company?
  • Is there flexibility in how and where the work can be performed?
  • Does the work or project require unique skills?
  • Are employees performing the same work?
  • Can the work or project be articulated in a clearly defined deliverable?
  • Will the work require internal control or supervision?
  • Are independent contractors common in your industry for this type of position?

When bringing in talent to your workplace, there are many options to consider. Temporary workers may fulfill a seasonal or short-term need, but are subject to certain regulations and may require additional fees if retained through a third party. Full-time employees may be an ideal solution for handling constant, ongoing business needs. Independent contractors are often the most flexible and cost-efficient route, providing specialized expertise, a wide pool of talent to choose from, and a variety of options when it comes to fulfilling project needs.

To learn more about the differences between independent contractors, and temporary and full-time employees, download our guide.   

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