Independent Contractors 101
Depending on the nature of your business, you may want to consider hiring independent contractors to help with the workload, or even just get you through the busiest time of the year. Before you do though, you should familiarize yourself with everything this entailed. Using independent contractors is different than hiring employees in many ways.
Legal Definition Of Independent Contractor
Legally speaking, in the U.S., an independent contractor is an individual whose work results you can control. What you cannot control is the way they choose to get the job done. As self-employed individuals, contractors pay their own income taxes, and you are not required to extend company benefits to them.
The IRS will scrutinize your business to make sure independent contractors are being treated as such. This means that they will be looking for certain conditions to be met. One of them is that they perform their work outside of the business’s office. As long as they are working independently, they meet the requirements to be considered contractors rather than employees.
Pros And Cons
There are pros and cons to hiring independent contractors. The pros include contractors costing your business less money than employees. However, they may expect to work at a higher pay level than your employees do. But in exchange, you are not paying money to offer them benefits. Another pro of hiring contractors is that you have more flexibility with them in many ways. Contractors do not need to be trained, as they will bring their own finely tuned skills to the job.
One con of hiring contractors is that it may cause the IRS to audit your business. This is done to ensure contractors aren’t being treated like employees or being led to believe that they are employees. Another is that they will often work with your business on one specific project, but then may move on to another job. Many contractors are constantly working for their next opportunity, and may pursue one without giving you any advanced notice.
For more information and additional advice on hiring independent contractors, please contact Diamond Capital Financing.