When faced with a hiring decision, one of the most common questions is whether to go with an employee or a subcontractor. Both have distinct advantages and disadvantages, and this guide will highlight the pros and cons of each.
Employees
Hiring employees is of course the most traditional staffing method. An employee:
- Is given training by your company to perform their assigned tasks
- Is employed and receives a paycheck directly from your company
- Does not accept outside work in the same field as your company employs them
- Is covered by your company’s insurance
- Operates under the name and insurance coverages of the company
- Receives a regular check and is required to keep track of hours within your system
Like anything else, there are pros and cons to hiring an employee.
PROS
- The employee works only for you and takes directions directly from you and your foremen
- Is typically trained by your company in your way of doing things
- Is accountable to you and your established chain of command
- Can be scheduled to work at given times by your or your management staff
- Is more likely to be invested in the success of the company
- Will not have scheduling conflicts with other employers/contractors
CONS
- Full time employees must have insurance made available to them, along with other benefits on a state by state basis
- Must be covered under your Workmen’s Compensation insurance
- You are liable for any damage or mistakes they cause
- You must provide (in most cases) tools and supplies to employees
Subcontractors
A subcontractor is a person hired to perform a certain task or series of tasks, who does not fall under the definition of an employee. A subcontractor:
- Is employed by themselves or a third party and is working on a contract basis for you
- Submits invoices for hours rather than drawing a weekly paycheck
- Maintains their own business finances and financial accounts
- Keeps and maintains their own tools and supplies
- May employ their own workers
- Do not fall under your legal obligation to insure
Naturally, there are pros and cons to hiring subcontractors:
PROS
- Reduces your liability, since they operate as their own entity
- May be more cost effective if employed for services you don’t typically provide
- Prevents you from having to insure more employees
- May be willing to work on different or off hours
- Will bring all tools and equipment needed to complete their part of the job
- Offers flexibility in terms of hiring and firing
- Can be a great reference is someone they know is seeking your services
CONS
- May eventually legally qualify as employees as defined by the Fair Labor Standards Act
- If the above is true, you may be liable for back pay, overtime, and other compensations
- May be more expensive than using an employee if you have to hire them regularly
- May be working on more than one job, which can lead to crossed signals/delays
- May be taking jobs for your competition
- You may not own the rights to a subcontractor’s work, which can include pictures of their work as well
As you can tell, there are pros and cons to both subcontractors and employees. While there is no “best” option, you can certainly maximizing your results by deploying either wisely based on present circumstances. When in doubt, go with someone on your payroll.
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