Today’s blog is especially relevant to business owners who are considering bringing more people into the company.
I’m going to give you an overview of the pros and cons of using employees or using contractors.
Most new business owners do most of the work themselves when they start.
You’ll recognise the list of tasks from administration and accounts, to sales and marketing, in addition to the actual work of the business itself.
Carrying on in this way is clearly not sustainable for most, and will restrict growth.
So, is it time for you to give tasks to someone else? Leaving you to concentrate on developing the company.
If you’ve read my other blogs you’ll know how passionate I am about advising business owners to work ‘on’ their business and not just ‘in’ their business. This really is the key to long-term and sustainable success.
So….What do you do?
For many it’s a dilemma. You may be wondering yourself whether to employ someone or to use a contractor, a freelancer or consultant.
Here I’ll be sharing my knowledge and experience of the pros and cons of employing or contracting people.
It’s my aim to help you to make the right decision for your business. Of course this also depends on the individual, and the qualities they bring.
Firstly, let’s look at pros of employing someone.
- Loyalty and commitment – an employee will be more loyal to you and your business, and they’ll usually be more committed
- Pride – an employee who takes pride in their work, benefits your business long-term ensuring a consistent quality of products and services
- Team – an employee will want to feel part of a team, and if you get this right they’ll work harder and better
- Cost – an employee costs less than a contractor, for doing the same tasks
- Training – once trained an employee can work without continued direction. You can also develop and keep skills in-house
- Delegation – it’s easier to delegate tasks to an employee to free up your time
- Holiday – an employee can look after your business, so you can take time off
So what are the cons of employing someone
- Getting the right person – if it doesn’t work out, it’s more difficult and costly to get another employee. Follow strict regulations, or risk facing legal action. Choose wisely otherwise you’ll be wasting your time and energy
- Recruitment – this can be costly in terms of time and money, going through applications and advertising costs. A recruitment agency can help with this
- Wages – an employee’s wages have to be paid on time, as stated in the contract. Even if your business is struggling with cash flow
- Payroll – you must complete and administer the legal requirements of employing people via your payroll systems, or face tax office fines
- Holiday and sickness – your business will need to cover the cost of an employee’s holidays and sickness, and keep records
- Staff benefits and training – an employee will expect benefits to attract and retain them. You’ll need to invest time and money in training an employee
- Pensions – auto-enrolment is costly to set up, and there’s a monthly outlay
Now let’s take a look at using a contractor.
Firstly what are the pros
- Flexibility – you can hire a contractor when you need them. A contractor can usually start at short notice
- Expertise – no training is necessary, and a contractor is great for one-off jobs
- Focus – you, the business owner, and any other staff can concentrate on your core business and give projects to the contractor
- Contract – you specify how long you need a contractor and what they’ll do
- Admin – you don’t have to pay or administer a contractor’s PAYE and National Insurance contributions
- Holidays, sickness and pension – you only pay for their services, so you don’t cover the cost and administration of holidays, sickness and a pension
- Cover – a contractor is great for covering permanent staff during sickness, maternity or paternity leave
And now the cons
- Cost – a contractor will charge a higher hourly rate for doing the same tasks
- Skills – your business won’t retain the contractor’s skills in-house
- Control – you don’t have the same control over how a contractor works
- Unrest – staff won’t like a contractor being paid more for doing the same work
- Company culture – a contractor won’t be part of your team and may not fit your business culture
- Promoting your business – a contractor is less likely to promote your business, unless that’s what you have hired them to do
- Taxes – you’ll need to be clear that your contractor is a contractor, or risk problems with the tax office. They can be classed as an employee and then have to be treated like one
Understanding the pros and cons of using an employee or a contractor, will make running and growing your business a lot easier.
If you would like business advice and help in developing your company – from staffing, to processes and systems – please get in touch. Our first two hours of advice are free.
Call 0808 123 1399 or email firstname.lastname@example.org