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Pros and Cons of hiring independent contractors

The process of hiring independent contractors can be a cost-efficient measure however, it has its own advantages and disadvantages. Therefore, it is integral to evaluate the benefits of hiring independent contractors for the corresponding firms before going ahead with the actual process, to prevent in-evident repercussions.

Who is an independent contractor

An independent contractor can be defined as a small entity or an individual who contributes towards performing professional services for other entities. Contractors are usually self-employed – they pay their own taxes and manage their health benefits along with other instances all by themselves. Furthermore, they work independently for multiple clients thereby, creating a unique engagement for themselves and emerging as freelancers. It is due to the above-mentioned metrics that every entity looks forward to hiring independent contractors rather than hiring full-time employees.

Looking to hire a contractor for a project? Multiplier can provide you with the top talents in the industry while managing all the legal efforts on your behalf!

Advantages of hiring independent contractors

The predominant benefits of hiring independent contractors rather than employees are enlisted as follows,

Ease with hiring

In most cases, hiring managers hire employees directly rather than evaluating the merits of hiring contractors or freelancers. It could be a tedious process to hire the right talent as employees for an open position. Whereas, independent contractors would be subject matter experts by themselves and would have a wide network with other similar professionals. It would simplify the process of hiring the best talent in the industry. This expands your search radius and identifies competent individuals to work with your firm as contractors for a short-term or even a long-term role.

Cost-reduction on the employee benefits front

With permanent employees, it is essential to sign an employment contract and pay them per the clauses stated in the contract throughout the year, irrespective of the financial performance or economy indicator of the firm. If yours is a growing business, this approach could be hazardous in the absence of established or steady cashflow. Moreover, in the case of independent contractors, if there is a decrease in the workload, it is feasible to shorten or even terminate the contracts or simply hire freelancers on an hourly basis depending on the timeline incurred to complete the task rather than paying a full-time salary. The advantages of hiring independent contractors also include cost reduction in terms of training or on-boarding permanent staff and overheads such as employee benefits.

Lesser admin efforts

Generally, contractors charge a higher price per hour than permanent employees but, hiring an independent contractor exempts intense hiring process or administrative efforts. There is a high risk associated with hiring a permanent employee as the employee may not be a right fit for the job role thereby, costing the firm even more to backfill the position. On the other hand, contract workers tend to have more experience and exposure to varied working environments than any random employee. This is highly valued as it means that the independent contractors can directly step onto the floor and get started on their specific roles.


Contractors often work from a remote workspace or home which saves the spend on office space. This exposes the firm to a wide range of talent pool for hiring international contractors. Contractors could also provide a certain type of flexibility that permits them to work at odd hours which may come in handy for your business when the permanent employees refrain from working at quirky hours.  Moreover, this flexibility also protects the core staff positions by hiring contractors only during busy seasons to maintain a balance with the employee headcount for the year-end cycle.

One of the most important benefits of hiring independent contractors involves the reduced risk of lawsuits. Permanent employees can claim a wide array of rights under the state and federal laws therefore, it is possible for the employers to be held against the law for either breaching or violating these rights. Some of the most common legal suits that could be filed by permanent employees include, compromising on the wage stated in the employment contract; employment discrimination on the basis of nationality, religion, gender, or other such differences and baseless termination. Per the global hiring trends, independent contractors are considered as entrepreneurs hence, they are not protected by any specific law which reduces the great risk of legal claims.

Disadvantages of Hiring Contractors

Although hiring independent contractors could prove to be a highly cost-efficient and timely measure, it does give-in to potential limitations. Significant risks associated with hiring independent contractors includes,

Retaining potential talent is tougher

There may be instances wherein, contractors may be willing to renew a contract or choose to work with the employer for a long period of time however, this is a rare case scenario. As they get experienced, it is natural for contractors to demand a higher pay or move along to other firms since, they are not bound by any other benefits that the company can offer. This is a major risk that every employer encounters, especially when hiring contractors as it may result in altering the talent stream on a timely basis.

Risk of working with non-compliant contracts

Contractors with no morale or commitment may cause significant limitations to the workflow or other issues. To mitigate these, it is essential to define all the clauses beforehand in the contract. It is to be noted that, incomplete or non-compliant contracts may also impose potential risks to the employer. We, at multiplier, help you to avoid such risk factors by drafting the entire contract with no roadblocks around managing contractors.

Paying global contractors

Although the commercials are discussed earlier, it could be highly taxing to pay international contractors in their local currency. This currency conversion appears as a generic issue faced by many employers who hire a globally dispersed non-payroll workforce. Multiplier can help you to remain compliant with the payroll processing for your contractors

Contractors consider their skillset as stocks

Contractors usually take pride in their niche of work and invest in building it further to keep themselves updated to the current trends. However, they are not loyal or invested in working for an organization. They consider their skillset as stocks thereby, aiming for a long-term return and not just short-terms benefits. While hiring contractors, it is advisable for the employers to sacrifice on the employee passion towards the company that may be cultivated amidst the direct hires.

PayScale is directly proportional to the work incurred

Full-time employees would not mind going the extra mile to complete a given task. They also would not demand or claim for an over-time PayScale. On the contrary, contractors insist on extra pay with no exceptions for the excessive number of hours that they have worked, apart from the clause stated in the contract.

Minimal Supervision

Employers tend to lose track on the progression of the task or its execution because the contractors work remotely. There is no opportunity for the upper management to monitor their performance until the work has been completed. It is still possible to guide the contractors however, it cannot stretch to an extent of micromanagement as the contractors basically desire to work as independent contributors to the core team.

To conclude, it is essential for every employer to evaluate both the above-mentioned advantages and disadvantages of hiring a contractor and make the most feasible decision. If you are thinking about hiring contractors for your next open position, you are at the right place. The services offered by Multiplier ranges from hiring a suitable talent to fit your requirements, to managing the legal documentation and other dependencies associated with onboarding or retaining independent contractors.

Tips to follow while hiring a Contractor

Gather multiple quotes

Once you have decided to hire a contractor, the first step would be connecting with multiple contractors and acquiring written estimates or quotations from them. These quotes should further be evaluated on the basis of the contractor’s proficiency with the task, client reviews, working hours stated, and similar other factors which may vary between each contractor.

Build a contract from scratch

Post choosing a specific quote or a contractor, secure a clear contract on mutual grounds demonstrating the following details,

  • Scope of work or services to be performed
  • Payment schedule based on the completion status of the task
  • The estimated start and end date for larger projects which would also depict the end date of the contract provided that the contractor was hired to assist only with a specific project.
  • Copyrights and risk analysis
  • Effect of termination of the contract
  • Signatures from both the parties agreeing to the clauses stated in the contract.

Beware of your right to termination

If at any instance, the contractor breaches the professional conduct stated in the contract, per the right of the termination clause, the employer holds complete authority to terminate the contract instantaneously. This may also be applicable for other malicious activities or data breaches performed by the contractor.

Oversee the direct involvement of the contractor

When a task is being passed onto an external contractor, it is highly possible for the entity or the individual contractor to subcontract the task to someone else in an attempt to earn more profit. Ensure to monitor the progress of the task regularly or at least on a timely basis to prevent such illegal activities.

It is now evident that, despite having numerous benefits or advantages, hiring contractors has its own disadvantages as well. Hence, it is advisable to have professional support through this entire process to keep your firm away from miscommunications that may lead to legal consequences. Multiplier helps you with the same! We are a global entity with an aspiration to support other firms in terms of hiring and managing contractors internationally. Be it, employees or independent contractors, we at Multiplier are here to help you to find the perfect match for the requirement at your firm and to manage the contract filing procedures efficiently. Contact us to receive more information on the services provided by us or to answer you queries in detail.

Binita Gajjar
Binita Gajjar

Content Marketing Lead

Binita is a Content Marketing Lead at Multiplier

Employ the best person for job, regardless of location

Employ the best person for job, regardless of location

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