Independent Contractor Definition

Not every small business owner is able to hire a full team of traditional employees, but many still need to get help with business tasks. Many choose to hire an independent contractor, a self-employed person who is hired on a contractual basis to complete services (as detailed by their contract). The independent contractor handles their own taxes and benefits, often making them easier and more affordable to hire than a traditional employee.

Using an Independent Contractor: The Advantages

Sometimes using independent contractors to tackle business tasks can be ideal compared to hiring traditional employees. It depends on the company’s unique needs. Here are some of the benefits of using independent contractors:

• Not having to withhold certain taxes on payments
• Saving money on employee benefits
• Not buying new equipment; the independent contractor uses their own
• Not needing to train anyone on how to do the tasks the independent contractor completes

If a business owner doesn’t need regular employees and they’re seeking a seasoned professional to handle certain business tasks, an independent contractor can be a great way to go. 

Using an Independent Contractor: The Disadvantages

Like many options in life, using an independent contractor isn’t ideal for every business. Hiring an independent contractor to handle business tasks might not be the best because:

• The business owner has less control over an independent contractor’s work schedule
• The owner has less control over an independent contractor’s work product
• An independent contractor doesn’t have to work exclusively for a single business

Independent contractors make their own schedules and can decide how and when to complete the tasks they do. Unlike an employee, an independent contractor might not be as available during all business hours because they’re likely working for many businesses at the same time.

In general, a business owner doesn’t have much recourse against an independent contractor whose work habits don’t gel with their own — at least for the duration of the contract. With an independent contractor, if the final product substantially complies with the owner’s needs and is completed within a reasonable time, then the independent contractor has fulfilled their end of the bargain. In some cases, if a business owner wants to part ways with an independent contractor before the contract is complete, they might have to pay a penalty. This is different from an employee; in many states, business owners can fire an unsatisfactory employee whenever they want (as long as the reason isn’t discriminatory or in violation of public policy). 

An independent contractor, by definition, is a lot more independent from a business than a traditional employee. If an entrepreneur needs more control over the people completing their work projects, they’re probably better off hiring full-time or part-time employees. 

Using independent contractors can be a great alternative to hiring employees

There are a lot of factors for entrepreneurs to weigh when deciding whether to use the services of an independent contractor for their business. If a business owner is looking for a professional with experience and doesn’t have the time or money to hire and train employees, an independent contractor can handle those tasks. But if the owner is very particular about how and when business tasks get completed, an independent contractor might not be the right fit. 

If an entrepreneur chooses to hire an independent contractor, they can maximize the control they have over the work project with a good contract. It’s wise to speak to an attorney about how to draft a contract that covers the business’s needs. 

When a business owner hires an independent contractor to do a particular job, they receive the pay for the work being done, but without the attachment that comes with the traditional employer-employee relationship. Owing to this flexibility, it might be a great option for some businesses. Read more about “How to hire independent contractors” here.

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