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 repercussions.
Who is an independent contractor
An independent contractor can be defined as 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 as freelancers. It is due to the these metrics that many companies choose to engage independent contractors rather than hiring full-time employees.
Looking to hire a contractor for a project? Multiplier can manage all the legal efforts on your behalf.
Advantages of hiring independent contractors
The predominant benefits of hiring independent contractors rather than employees are as follows.
Flexibility
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.
Lesser admin efforts
Generally, contractors charge a higher price per hour than permanent employees, but hiring an independent contractor foregoes an intense hiring process. 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.
Agility
Contractors often work from a remote workspace or home which saves the spend on office space. 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 if permanent employees are not available.
Compliance
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 local employment law. 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. Independent contractors are not treated as employees, 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 have potential limitations. Here are some of the risks associated with hiring independent contractors.
Retaining potential talent is tougher
As they become more experienced, it is natural for contractors to demand a higher pay or move along to other firms since they are not bound by being employed. This is a major risk that every employer encounters, which may require refilling roles periodically.
Risk of working with non-compliant contracts
To prevent issues with scope of work, 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.
Paying global contractors
Thanks to currency exchange fees, it can 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 seamless payroll processing for your contractors.
Minimal oversight
Employers find it harder to monitor contractors as they work outside of a business’ ecosystem. There is no opportunity for the upper management to monitor their performance until the work has been completed.
To conclude, it is essential for every employer to evaluate 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. Multiplier makes it easy to quickly and compliantly onboard and pay contractors, wherever they might be in the world.
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
- Copyrights and risk analysis
- Effect of termination of the contract
- Signatures from both the parties agreeing to the clauses stated in the contract.
Be aware 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.
Conclusion
Despite having numerous benefits or advantages, hiring contractors has its own disadvantages as well. It is advisable to have professional support through the entire process to keep your firm on the straight and narrow. At Multiplier, we support you in hiring and managing workers from around the globe. Be it employees or independent contractors, we at Multiplier are here to make the process compliant and simple. Book a demo today.
