Hiring Independent Contractors vs. Employees for Startup Success

When you’re starting a new company, hiring employees can be a difficult task. Although most startups have 10 or fewer employees, it’s important to have the right team in place to ensure everyday operations run smoothly.

When I started my company, Ciplex, I got a firsthand look at the factors that dictate whether or not a startup will survive through the first few months. One of the biggest decisions to make is determining kind of additional help to hire.

Let’s face it--when a business is in the startup phase, there are benefits and downsides to hiring full-time employees versus working with independent contractors. No matter what industry you’re in, your workers are your partners in success, so what approach should you take when it comes to hiring the right talent to get the work done?

Pros and Cons of Working With Independent Contractors

Working with independent contractors can be a safe, risk-averse approach to hiring and running your startup. Hiringindependent contractors can help to eliminate overhead costs like employee benefits, training programs, and supplies. And because they often work on a project-by-project basis, this gets rid of the need for a long term commitment. That means it’s easy to switch up who you’re working with if things don’t work out.

Still, the cons to hiring independent contractors can’t be ignored, either. The IRS determines that workers can only be considered independent contractors if the employer doesn’t attempt to control how the project is done. This means the employer can only direct the result of the work--not how it’s completed. This could lead to high turnover rates as you attempt to find a contractor who meets your needs.

In addition, an independent contractor may lack the passion you’d find from a full-time employee. This is because a full-time employee dedicates much larger chunk of their life to your company, rather than working with you on projects intermittently. Contractors may be less engaged with your mission and have fleeting dedication to the company.

Pros and Cons of Hiring Permanent Employees

There are certain tasks that must be completed on a routine basis, so it can help to have someone on staff whose sole duty is to carry out those tasks daily. Employees are available in the office when you need them and are often more than willing to take on multiple roles when necessary--something that can’t be expected from independent contractors. As mentioned above, employees also tend to be more dedicated to the mission of your company, because they have a greater stake in the work you do each day.

Unfortunately, hiring is a costly undertaking. Employers at startup companies have to consider things like acquiring adequate office space, providing a consistent salary and benefits, employee laws, and spending money on training. Hiring employees can be more expensive in major metro areas, too, as it becomes much harder to hire employees from more remote locations.

Because there are pros and cons to both of these approaches, it’s important that startup CEOs and managers be realistic. Do your projects and tasks require someone to dedicate 40 hours per week, or can your projects be completed on a more independent basis? Determine what’s best for your company to ensure you hire the right kind of talent.

(Photo courtesy thinkpanama, Flickr)