Once a Tech Small-to-Medium-sized business (SMB) has made the decision to bring a new team member on board, the next question they may face is whether that person should be an independent contractor or a permanent employee. As featured in an article on the website of Small Business Centres Ontario, here are several factors to take into consideration when making this decision:

Is the work of finite scope, or ongoing need?

Independent contractors are often hired when a company has a project that needs to be completed which requires an individual with a specialized skill set, and has a well-defined scope with clear start and end points. In comparison, if the duties and responsibilities of the position are continuous, a permanent employee is the better option since you will not be repeatedly training someone to do the work. This is of particular importance if the work requires specialized equipment or has strict procedures that must be followed.

How much availability and team interaction do you require?

It’s important to consider what you are expecting of your new addition. Do you need them working: in-person; certain hours of the day; with other team members; and/or working exclusively for you? In this case, a permanent employee may better meet your needs, since independent contractors are able to take contracts with more than one company at a time, and as such their availability may not align with your team’s and/or company’s needs.
Are there limitations to available capital to pay for the worker?

The pay rate for an independent contractor may be significantly higher than the pay rate for a permanent employee. However, consideration must be given to the additional expenses that are incurred when hiring a full-time employee (i.e. vacation pay, worker’s compensation, health benefits), in comparison to the length of the contract for a contractor. The contractor is paid only for the work performed (either at an hourly rate or an agreed upon amount for the project), so the overall cost may be less when hiring a contractor.

Taking the time to assess what you need from a new team member will help you to determine which option works best for your company at the present time. There is also the possibility of hiring an independent contractor that is later hired on as a permanent employee. This gives you the opportunity to assess their performance, and to determine if their skillset and attitude are a good fit to contribute to your company’s growth and culture.

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