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Understanding the Differences Between Hiring Freelancers, Contractors and Employees

Hiring the right help for your business can be confusing and intimidating

By | Lyle D. Solomon | www.entrepreneur.com

Very often,  starts as a solo venture or a partnership. But as the  expands, keeping up with client demands can be too much for any business owner to take on themselves. This is actually a good problem to have. Unfortunately, not everyone knows when it’s time to bring in extra help. The simple answer? If you are losing business, you need to make a change. Depending on your situation, however, hanging a “now hiring” sign may not be necessary. While hiring employees can certainly help, are they the right kind of help? With an evaluation of your needs, you can decide if hiring a freelancer, contractor or employee is right for you.

Fundamentally speaking, the major differences between freelancers, contractors and employees lie in their relationship with the business owner. Freelancers and contractors are self-employed individuals, while employees are hired by the company. Freelancers and contractors typically set their schedules based on the needs of their clients and  out a payment schedule (typically upon completion of a job). Employees, however, work the schedule established by the company and receive a regular paycheck on a schedule set by the company. As a business owner, you are responsible for tax reporting on any  employees you have. But since freelancers and contractors are considered self-employed, they are responsible for reporting their taxes.

Sometimes people will use the terms “freelancer” and “contractor” interchangeably, but there is a difference in the type of professional you are hiring. Freelancers usually work on smaller, short-term projects, while contractors work on larger, more long-term projects.

When should you hire a freelancer?

Before deciding if hiring a freelancer is a viable option for your business, it’s important to understand exactly what a freelancer is. Freelancers are people the  considers to be self-employed, meaning there is no need to onboard them as “official” employees. They are responsible for reporting their earnings and taxes. Since they are not payroll employees, there is no expectation for benefits.

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