Question: Hire a Contractor or Employee?

Answer: It Depends.

Written by Deanna Hunter

Contractor or Employee?

I was asked recently for my advice about whether to hire a contractor or an employee to fill a role required at a small business.  I know the business owners were hoping I’d have a pat answer for them.  I didn’t.  I gave them an “it depends” answer instead.  Several items should be considered before getting to an answer.

First things first.  You have to be clear on the difference between a contractor and an employee.  Alberta Employment & Immigration identifies four things that they use to identify the difference.

  • Business relationship or employer-employee relationship
  • Ownership of tools
  • Chance of profit/risk of loss
  • Integration

They have done a great job in explaining all of this and why it matters, so I won’t get into the details here.  Check out the information at Employee or Contractor? Know the Difference.

Once you are clear on the difference between a contractor and an employee, answer several questions for yourself.  What type of work needs to get done?  Is it transactional work that is easily duplicate?  Or is it work that requires a specialized skill or knowledge base to complete?  Is it work that is only required for a short term?  Or is it work that could continue for months or even longer?   Does work at your business get done with full collaboration by a team of people?  Or is independent thinking and tasks how you roll?  Is the work core to your business and better kept close? Or can it be passed on to a third party without worry?  Is the work customer facing, or is it internal only?  Having answered these questions, you might find the solution starting to become evident.

Consider a few final items.  On the upside, hiring a contractor provides flexibility, financial savings, and less liability than an employment relationship.  But don’t forget, you will likely pay a higher hourly rate in exchange for those things.    And just because they are a contractor doesn’t mean they don’t require structure and oversight.   I also recommend some basic on-boarding time.   And for the contractors that do great work and who you’ll want to contract again in future, some effort to maintain a longer term relationship is necessary.

Once you have considered all of these factors you will be able to get past “it depends” to a good decision.  If you are still stuck…give me a call!

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