Authored by Charlie Edwards, Womble Carlyle Sandridge & Rice, PLLC
Traditionally, if a company needed a job done, it hired someone on staff to perform that service. But employers increasingly are turning to outside independent contractors, particularly to provide services that fall outside the company's core competency. For example, a factory which manufacturers computer components might not need to have someone on staff to run the cafeteria or to keep the place clean. Independent contractors provide increased cost savings and flexibility to employers – but only if the process is handled carefully. The following are ten good reasons to consider hiring independent contractors to perform certain duties.
1. I'm tired of training, managing and communicating with employees.
The independent contractor, or his or her employer, is responsible for their work. If you have a problem, it is up to the contractor to straighten it out. The burden of management is off the employer's shoulders.
2. Paying and providing benefits for employees involves a lot of effort; I'd rather have a set price.
Independent contractors aren't on payroll, nor are they eligible for company health insurance, retirement plans or benefits. You simply pay an agreed-upon price (which may or may not be an hourly rate).
3. FICA, FUTA and state payroll taxes are a pain; I could free up administrative personnel.
Similarly, you do not have to calculate federal and state payroll tax deductions for independent contractors. The burden of paying taxes falls squarely upon the contractor - you simply provide them with a 1099 at the end of the year. As is the case with benefits, not having to calculate payroll taxes for independent contractors can alleviate the burden on your accounting and HR staff.
4. Keeping track of overtime and minimum wage involves a lot of technicality, including worrying about whether employees are properly classified.
Wage/hour claims are among the most common labor and employment complaints filed against employers. Resolving these disputes can be expensive, either in paying penalties and back wages, or simply covering legal expenses. But hiring independent contractors removes much of that liability from employers.
5. Independent contractors can't file discrimination claims, sue you for wrongful discharge or argue about labor law violations.
An employer-employee relationship doesn't exist when hiring an independent contractor. It is more akin to two companies engaging in a business relationship. The employer has much greater latitude for ending such relationships than it does in terminating a company employee.
6. Independent contractors who are injured on the job have no workers' comp rights and can't get unemployment compensation if you terminate them.
These burdens fall upon the independent contractor, not the employer. The contractor may seek remedies in civil court, but the normal channels of worker's comp and unemployment compensation aren't part of the independent contractor relationship.
7. Government regulation of the employment relationship is costly and time-consuming.
Labor laws, taxes, worker's compensation, wage/hour laws, are only some of the examples. Few areas of the law are as closely governed as those surrounding the workplace. Hiring independent contractors removes much of that red tape.
8. Labor and employment lawyers are expensive, and I don't view them as mission-critical.
It's simple - fewer legal entanglements mean fewer opportunities to need labor and employment attorneys. Hiring independent contractors is a simpler, more streamlined process.
9. My goal is to spend all my attention on providing our products or services.
Obviously, many jobs require full-time, in-house employees. But other tasks, while still essential, don't directly relate to the company's mission. Outsourcing these jobs to independent contractors can "clear the decks" of unnecessary complications and allow the company to focus on the things it does best.
10. If I get it wrong, all the things I was trying to avoid will eat me alive, and I enjoy pain.
Do your homework before, not after, an issue arises, and always keep your labor and employment attorney's phone number handy!