Full-Time Workers vs. Contract Workers Which Option Is Cheaper - Spark Hire

Full-Time Workers vs. Contract Workers Which Option Is Cheaper - Spark HireAs your business grows, determining which type of employee to hire is a crucial deliberationand the main divide, full-time versus contract workers, will have a huge impact on your businesss budget.Depending on what your business needs from a position, choosing to go with a full-time worker or a contract role could make a major difference in your ability to succeed. Handle the situation incorrectly and you open yourself up to tax fines, or even a legal liability.Should you make your businesss next open position a contract or a full-time one? And what investments will these two types of hires entail?Heres your guide to deciding which route will be more cost-effective for your businessFull-Time WorkersFirst, lets take a look at what hiring a full-time worker would entail. You likely know that bringing on full-time workers involves more administrative tasks and upfront costs for your business. However, investing i n a full-time worker now could save you from unforeseen costs in the future.Full-time worker costs and logisticsSome small business owners hesitate to hire full-time employees because this type of worker typically involves substantial costs and administrative work. For example, youll need to pay half of the Social Security and Medicare taxes that each full-time employee owes.But beyond those legal tax obligations, youll also need to offer up significant employee benefits to attract top talent to a full-time role. These can includebut arent limited toHealth, dental, and einbildung insuranceEquityPaid time offParental leaveWorkers compensation insuranceThorough job trainingProfessional development programsTop-tier tools and equipmentA stellar office spaceLogistically speaking, full-time employees will require more from your business, as well. Your business will need to deduct employment taxes on behalf of full-time employees. This will include Medicare taxes, Social Security taxes, an d any state and local taxes that apply.Not to mention, because full-time employees are legally part of your business, they will be your businesss responsibility. As a result, purchasing general liability insurance that covers full-time employees will be a crucial investment.When full-time workers are the best fitTheres no doubt that full-time employees will require more upfront investments of time and money from your business. Even so, its possible that the benefits of hiring a full-time employee could more than make up for these investments.For instance, you can more closely supervise the work of a full-time employee than you would a contractor. Plus, your gruppe can better communicate with a full-time employee, since theyll be on the same schedule as everyone else.As a result, full-time employees build a greater understanding of your workflows and culture. This makes working with them on a series of projects more effective than hiring various freelancers or contractors and having to onboard them to your processes each time.It also helps that full-time employees have a greater sense of loyalty towards their employers, not only contractually speaking, but also thanks to the benefits you provide. Youll be much less likely to cycle through full-time workers than contractors, reducing training costs.Because of all of this, though they might not be the cheaper option, full-time employees are the better option for businesses who need to access dedicated workers for evergreen projects and functions. Though putting a dollar value on all the benefits of full-time employees isnt easy, if youre seeking loyalty and focus from a worker, then investing in a full-time employee is the best way to access these upsides.Contract WorkersInvesting in full-time employees is still that an investment.Many small businesses especially those who are hiring their first few workers cant afford the benefits necessary to get top talent in-house. If thats the case, hiring an independent c ontractor is a more affordable option.Contract worker costs and logisticsContract workers tend to involve fewer costs and logistics for business owners. They pay their own taxes, which means fewer taxes you wont have to pay half of the workers Social Security and Medicare taxes and less administrative work for your business.Plus, they dont require your business to invest in any benefits like health insurance, office space, or paid time off. Contract workers also have to pay for their own general liability insurance and professional liability insurance because they are their own separate business entity.Hiring contract workers also has its downsides, though. Legally speaking, theyre only allowed to work 130 hours monthly for a single employer. Contract workers also make their own hours, so your team wont necessarily be able to reach them on a given work day.Perhaps most importantly, contractors will have less loyalty to your business. Contractors are often working on multiple proje cts at a time, and yours might not take precedence if another business is offering a better rate. You simply cant hold them accountable in the same way you do full-time workers.When contract workers are the best fitAll in all, contract workers are ideal for small businesses that need access to expert help for seasonal or short-term projects. Because contractors have a legal limit and sometimes a mental limit to the amount of work they can do for you, they arent great hires for long-term business functions.Full-time vs. Contract workers Moving forwardSo, when you measure the upfront investments of hiring full-time versus contract workers, theres no question Contract workers will almost always require less investment of time and money for your business. Even though opting for contract workers can help you cut costs now, however, hiring a full-time employee will be an investment in your businesss future.About the AuthorRanda Kriss is a staff writer at Fundera, a marketplace for small business financial solutions such as business loans. Randa writes extensively on human resources and has also written dozens of reviews on payroll services and eCommerce solutions.