When faced with the need to hire more staff to complete a project or add a new skill set to your team’s capabilities, hiring an independent contractor can often be more beneficial than a traditional employment agreement.
According to HRD Magazine, as many as 20% of employees in a survey say they would be interested in becoming independent contractors. It is likely that employers worldwide will be presented with a greater variety of contractor options in the future as these kinds of agreements can be beneficial to both employer and employee.
However, understanding whether it’s good to hire an independent contractor over an employee first means understanding the differences between the two work agreement types.
In a nutshell, an independent contractor differs from an employee because they are not responsible for anything beyond the specific work written in the initial contractor agreement. In turn, an employer is not responsible for offering anything to a contractor beyond the basic service fee. This includes not needing to provide tax management or employee benefits.
This more flexible arrangement allows for many advantages over a traditional employee-employer agreement. Below, we’ve gathered some of the more considerable benefits of hiring an independent contractor, whether locally or internationally.
1. Flexibility and Scalability
Because independent contractor agreements require less setting up and terminating, you can increase and reduce the number of contractors or hours per contractor far easier than with an employee. This becomes especially useful for short-term projects or projects where your staffing requirements may change quickly and without warning.
2. Rapid Market Entry
Hiring and onboarding employees can take weeks or even months to find the perfect person. Finding an independent contractor can take a fraction of the time, requiring little to no onboarding or training.
Contractors are experienced and only need a project briefing. They can also be hired anywhere in the world through the use of a local PEO or EOR partner, meaning you can quickly begin operations in markets around the globe.
3. Access to a Wide Variety of Talent
You can now look for contractors worldwide, thanks to the growth of remote work possibilities. In addition, since independent contractors are hired temporarily, you can hire staff without the need to consider long-term complications or requirements. All of this means that your team can benefit from skillsets or ways of thinking that may be rare or unavailable in your local area.
4. Overall Costs Per Employee
Independent contractors require none of the costly overheads of a traditional employee. You save on every cost that goes into an employment contract, from employee benefits like insurance and social security contributions, tools, and training, to day-to-day expenses like office space rental.
The USSBA estimates that employment agreements can cost as much as 125-140% of employee salary when everything is considered, but an independent contractor agreement means you don’t have to budget for anything beyond their service fee.
5. Fewer Responsibilities
Connected to the idea of saving on cost is the stress you’ll avoid from not being responsible for the usual responsibilities taken on when employing staff. In addition to saving on tax and social security contributions, with independent contractors, you aren’t liable for any forms of insurance or costs that don’t directly relate to problems that happen on the job.
6. Experience and Independence
Contractors are typically at the top of their fields, meaning you will be hiring the best. This should certainly be taken into consideration if you want to complete a project that requires skills or experience currently unavailable to your team. More than this, though, a contractor can work will little to no direct management, saving you time that can be spent on other project areas.
7. The Benefits to Your Employees
An independent contractor can be an excellent way to give your employees indirect training by having them work alongside and learn from an experienced contractor. While you can’t expect an independent contractor to instruct your employees if that isn’t part of their service agreement, your employees can benefit from simply watching the contractor’s work process.
It should be noted that misclassifying an independent contractor can have severe repercussions for an employer. Labor disputes regarding independent contractors are intricate, lengthy, and focus heavily on contract interpretations.
By asking or expecting a contractor to do anything outside of their agreement without first amending that agreement, an employer may become responsible for offering all employee benefits as they would for a full-time employee. Failure to do so can mean hefty penalties or fines.
While arbitration courts currently statistically favor the employer in these matters, it should be noted that there are attempts to reform this in favor of the worker. This should be a point of consideration for any employer thinking about hiring an independent contractor in the future.
Alternatively, it’s worth considering using a Global PEO as another way to gain the advantages of both independent contractor and employee. A global PEO can hire staff on your behalf, giving you the flexibility of an independent contractor agreement while also allowing you the exclusivity and focus of a full-time employee.
Paying an independent contractor through an Employer of Record or PEO couldn’t be simpler. Contact INS Global’s team of EOR experts today to see how this service can benefit your operations overseas.