Managing an Independent Contractor vs Employee
When you take on an independent contractor vs employee it requires a different style of management because, by definition, contractors are self-employed or work for another business so they are effectively a supplier.
Business Coaching Insight:
Contractors should be able to come in and do a job to your specifications and require little managing
This obviously makes the basis of your relationship with them quite different because they are not a part of your business like your employees.
When you take on employees it's your responsibility to supply all the resources they need to do their job and it's up to you to decide how they should spend their time and how to go about completing work.
On the other hand, contractors are generally skilled people that you hire for the specific purpose of completing a project or task in your business.
They use their own resources to get the job done, they work the way they want to (within the time frames you set) and if they want to, they can delegate elements of the project to other people.
You want a job done, they do it for you and then they invoice you. Just as you would with tradespeople coming to do work at your house. You pay them based on the results but you have little say in how they go about it.
Also, if extra work comes up that you want completed as part of the project, a contractor can negotiate an extra fee to complete it and if you can't come to agreeable terms, they are within their rights not to take it on.
Pro's & Con's of an independent contractor vs employee
- Cheaper – whilst contractors may charge more per hour you don’t need to pay their tax, benefits and other associated payroll costs. You also don’t need to pay them for sick days, holidays etc.
- Flexibility – contractors are a variable cost in that you only pay them for the work they do for you. If business slows down, you can just scale back the work you give them.
- Motivation – self-employed contractors tend to be more motivated and better self managed
- Space/resources – many freelancers work from home or their own offices so you don’t need to supply office space, equipment and supplies
- Termination – if you are not happy with a contractors work it is much easier to terminate their contract than it is with an employee
- Lack of control – they are their own bosses so they decide when to go on holiday, how much work to take on, how to do it etc. You are literally only paying them for work completed so you have very little say in when/how they do things.
- Costs – if you ask a contractor to take on another project or do additional work, they are within their rights to charge you extra. They can also choose when to renegotiate fees.
- Loyalty/commitment – Since contractors are free to work for a number of clients they may have less loyalty and commitment to you and your business.
- Team culture - it may be more difficult to create a team ethos with a lot of contractors since their loyalty y may not make themselves available for team bonding exercises.
Business Coaching Questions:
- What are the benefits to your business of an independent contractor vs employee arrangement?
- Do you want to be able to supervise and control how work is completed?
- Are you building a team or do you just want work done?
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