Independent contractor vs full-time employee

Many companies are faced with a difficult decision: Should I hire a full-time employee for my team or go with an independent contractor? Both options have benefits and things to consider, so without further ado, let’s take a look at the advantages and disadvantages of hiring international contractors or full-time employees, so you can make a well-informed decision for your business.

Employees who work for you full-time are hired by your company and therefore spend their working hours dedicated to your projects. They are not paid by project, but rather have a fixed income and generally use your company’s resources to complete their work. In return, the employer has to pay income tax as well as social and other benefits for the employee and manage their day-to-day activities. Generally, a termination notice is required if you want to end the working relationship with your employee.

Contractors on the other hand usually work on a freelance basis, meaning they only work when required and have other clients. They are paid by project and only dedicate the necessary hours to working for you. In turn, they are responsible for their own tax and you don’t have to pay any benefits for them. They also generally use their own resources, keeping expenses for their clients low. Depending on the contract, work can often be terminated at any time or only requiring a short notice period.

1. Flexibility

Generally speaking, contractors are flexible and easily scalable, giving your business a lot of freedom to plan resources on a project basis without having to make recurring payments at times when the investment would be better made elsewhere.

2. Experience

Independent contractors also usually have a lot of experience working for companies from all over the world, that you could use to your benefit, for example for entering a new market.

3. Independence

Another positive aspect of contractors is that they work very independently, freeing up management time for you to focus on other projects.

4. Cost

And finally, they might also save you money over time, as even though their rates might be higher than what you would pay an employee, you don’t have to pay taxes or other benefits for a contractor, giving you more financial flexibility.

1. Loyalty

Full-time employees usually don’t work for other clients and therefore spend their time fully invested in improving your business. They are far more loyal to your company and will probably put in a lot of effort, as their professional success is directly linked to your business's success.

2. Knowledge

While contractors often have a lot of experience, your full-time employee’s knowledge will stay within the company. This allows the whole business to benefit off of the experience and know-how of your employees, and not just get access to a fragment of shared knowledge of a contractor.

3. Legal clarity

Finally, one of the biggest advantages of full-time employees is not having to deal with legal gray zones and misclassifications. It significantly reduces compliance issues and eliminates the risks of penalties for wrongfully classifying someone as a contractor who should have been classified as an employee.

As you can see, there are many advantages to both options. Identifying the better solution for your business is based on individual needs.

If you quickly need an international contractor to help out with a temporary project, hiring a contractor is probably the way to go. On the other hand though, if you are looking for long-term support for entering a specific market or keeping a special skill in house, you might want to consider hiring a full-time employee.

Whichever route you take, you don’t have to walk it alone. Global employment solutions such as companies that act as an employer of record take care of legal issues concerning hiring international staff for you. Shoot us a message if you want to know more about Lano’s employer of record service.