Should you hire employees or contractors?

You just formed your business in Georgia, and you are ready to hire people to work for you. It is time for you to decide who is best for your company, an employee or an independent contractor. Both have pros and cons, and one may fit your needs now better than the other. However, make sure you classify them correctly or you can face costly legal implications.

According to Entrepreneur, hiring an independent contractor may be best if any of the following apply:

  • You need someone with a specific skill that you or any current employees are not able to provide
  • There is not a consistent demand for a service or product
  • You do not have employees and you need someone to perform a task on a temporary basis 

Hiring an employee may be better if you have consistent work and you want a sense of loyalty. Financially, it makes sense to hire an employee on a full-time basis if your profit margins are at 50% or higher. Depending on the company, it may be a smart business decision to have a mixture of both employees and contractors you can hire out when projects become available. 

According to the IRS, it is important to classify and pay your workers correctly. If you hire contractors, you do not pay for benefits or take out any taxes, but they are basically in control of when and how the work gets done. With employees, you are in charge of their work, but you are also responsible for tax withholding and certain benefits. If you classify incorrectly, you will be responsible for past employment taxes and may face additional consequences.



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