Almost 30% of American workers are self-employed or independent contractors. That’s 44 million people.
For the workers, it provides freedom and flexibility. For companies, using independent contractors can provide many benefits.
Interested in the difference between contractors vs. employees? Read on and learn when contractors might be right for your business.
What is an Independent Contractor?
It’s important to define what an independent contractor is. They perform work for your business, but they are not employees. Independent contractors are self-employed and subject to self-employment rules.
The IRS states companies who use contractors specify the result of their work. But the contractor decides the actual work they do and how they will do it.
Independent contractors pay self-employment taxes. The company paying the contractor is not obligated to withhold any taxes. Proper tax classification of independent contractors is important.
Which Companies Are Using Independent Contractors?
Many industries use self-employed contractors for some of their functions. Here are some of the many industries that opt for contract labor:
- Information Technology
- Accounting and Finance
- Customer Service
- Software Development
- Project Management
- Education and Training
There are types of contractors available to perform most tasks within a company. You can find specialized talent or people to take on general tasks. And using independent contractors can provide your company with many benefits.
What Are the Benefits of Hiring Contractors?
A common issue among business owners is managing fluctuating workloads. Many companies have busy seasons or need short-term help. These situations make it challenging to balance workload with headcount.
Independent contractors are ideal for situations where the workload changes over time. Instead of bearing the cost of full-time employees, you can hire contractors as needed. And you can hire workers to do specific tasks for a set amount of time.
Freelancers and other contractors help reduce office space and supply costs. There is also tremendous savings on taxes and employee benefits. And you avoid the cost and hassle of recruiting and training new employees.
How Do I Manage Many Contractors?
Some companies use many different contractors. This can be helpful with understaffed departments. It’s also a good arrangement for seasonal workers.
If you use independent contractors in your business, consider outsourcing HR. Working with contractors involves specific requirements. IES provides payroll and HR solutions tailored to your business.
Learn more at Innovativeemployeesolutions.com.
You should also consult with a financial advisor. They will help you account for contractors the right way to avoid tax issues.
Diversify Your Workforce
Using independent contractors helps companies do more for less money. You can adjust the number of contractors over time as your needs change. And there are significant savings associated with using contractors.
If you use many contractors, consider working with an agency. Choose a partner who specializes in payroll and HR solutions for contractors. Consult your accountant on how to classify your workers for tax purposes.
To learn more about managing your business, please explore the rest of our site.