There are times when every business could use an extra pair of hands, new eyes and fresh thinking. It may be to fill a temporary skills gap in your regular workforce, increase efficiency or perhaps you have a short-term project that needs a specialist to get it done. Either way, hiring a contractor could be the perfect solution and save you the time, effort and cost of recruiting a new employee.
Contractors are self-employed, experienced professionals who provide specialist services for a set period of time. There are contractors in virtually every field and industry but are most common in IT, finance, professional services, project management, sales and marketing, HR and training.
What is the difference between a contractor and an employee?
There are some key differences between a contractor and an employee and it’s these differences that often make hiring a contractor preferable.
- is responsible for their own ‘business’ dealings
- pays their own taxes and National Insurance
- can be working on assignments for several clients at the same time
- controls how and when they do their work
- is free to choose the work that they do or do not take on – they are not obliged to accept a contract
- may hire a substitute to do the work for them
- assumes liability for any errors or omissions
- is not entitled to the employment rights and benefits enjoyed by employees, such as paid holiday and sick leave
The distinction between a contractor and an employee is important. You could end up paying unnecessary additional taxes if you treat a contractor as an employee. Equally, treating an employee as a contractor could also have adverse consequences for your business. Establishing the correct status of all workers is key. Make sure you keep the distinction clear by always following the guidelines on this area of employment law and seek advice from your accountant.
What are the benefits of hiring a contractor?
The two key benefits to any business of hiring a contractor are the skills and experience that they offer. Being a contractor can be a risky business – no employee rights, no guaranteed work – so it is not for the faint-hearted or the under-skilled. Contractors therefore tend to have excellent skills and experience in their field as they are the cornerstones of ensuring they get the work they need to make a living.
Other benefits to businesses include:
- quick access to new skills and technology, especially in fast-growing fields and areas (e.g. digital technology)
- greater organisational flexibility – recruit contractors and terminate contracts according to market changes
- lower overheads – no employee benefits to pay out
- value for money – no recruitment or training fees to pay and they may cost less than putting a full-time employee on the project. Use online accounting software to keep an eye on these costs
- less legal liability – contractors are responsible for their own insurances
Another significant benefit can be their attitude and approach to their work. While they may be autonomous, they can be more focused and work more efficiently on the job in hand.
At Approved Accounting we are experts in small business accounts, but we are also here to offer advice and guidance for our clients. Email Jon now to find out more about how we can go beyond looking after your accounts.