The Advantages & Disadvantages of Hiring an Independent Contractor
If a company cannot afford to hire employees or only has a temporary assignment, an alternative is to hire an independent contractor. It is similar to hiring a temporary employee, with a few key differences. Before you hire an independent contractor to work for your business, explore the advantages and disadvantages of this type of arrangement.
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Description
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Contracting work is commonly associated with a service, like design or sales. When you establish an arrangement with an independent contractor, you provide that person with a work order to be completed by a certain date. This person is not your employee -- rather, it is a service provider and client relationship. Upon successful completion, the contractor sends an invoice for the amount due to retrieve payment. Unlike an employee, a contractor is responsible for paying his own taxes and expenses.
Advantages
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The main advantage of working with a contractor is lower overall cost due to the fact that you do not have to maintain or manage an employee onsite. When you have employees, you must pay the base salary, benefits in some cases and costs associated with the employee's use of business supplies. With an independent contractor, you can negotiate a flat or hourly fee and that is where your financial obligation ends. Also, you do not usually have to learn and follow stringent state employment laws, since this is not an employee.
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Disadvantages
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One major disadvantage of hiring an independent contractor is that the person may not understand your business as fully as a full- or part-time employee who works in-house. An independent contractor also is less likely to remain loyal to the business and may decide to move on from the company at any time -- it is usually a short-term working arrangement that can change or cease at any time depending on the terms of your contract with the person. It also is more risky to work with an independent contract when it comes to issues of privacy and confidentiality.
Suggestions
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If you plan to work with an independent contractor, it is wise to establish a clear process for doing so beforehand. Write a plan that outlines everything from the recruitment of contractors to the process of paying invoices in a timely fashion. Inform the contractor of this process so that you are all on the same page before work begins. Mismanagement of independent contractors can cause both short- and long-term negative repercussions for the company.
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