Pros and Cons of Hiring Independent Contractors
by
Attorney Stephen Fishman
Learn the advantages and disadvantages of using independent contractors rather than employees.
There are many benefits to hiring independent contractors (ICs), but there are some disadvantages as well. Before you decide how to staff a particular job, you'll need to weigh these pros and cons -- and make sure that your decision will pass muster with state and federal auditors.
Benefits of Using Independent Contractors
There are several major advantages to using independent contractors rather than employees, with financial savings topping the list.
You will probably save money. Even though most employers pay ICs more per hour than they would pay employees to do the same work, it usually ends up costing employers more to hire employees. When you hire an employee, you will have to pay a number of expenses that you don't have to pay for ICs, including employer-provided benefits, office space, and equipment. You will also have to make required payments and contributions on behalf of your employees, including:
- your share of the employee's Social Security and Medicare taxes, which totals 7.65% of the employee's compensation
- state unemployment compensation insurance, and
- workers' compensation insurance.
All together, these payments can easily increase your payroll costs by 20% to 30% -- or more.
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