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Employee Versus Contract Worker: Which Should You Hire?

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Hiring an employee versus a contract worker can lead you to ask a variety of questions about the differences between the two, but the type of work you need in your organization will ultimately determine the best choice for you.

Some business owners choose to avoid the overhead cost that accompanies hiring employees such as benefit costs and training, so they bring in independent contractors to save money. Both have their own list of advantages and disadvantages and sometimes the lines can get fuzzy, but understanding the differences between the two will help you determine what’s best for your business.

Here are the pros and cons of hiring an employee versus hiring a contract worker:

Hiring an Employee


  • An employee works directly for your company and answers to you or a manager.

  • You determine the wage for an employee, while a contract employee may have the ability to set their own wage that you must agree to pay them as a contingency of employment.

  • An employee is easier to access when the workload increases. It could cost a lot more to hire a contractor in the event of an emergency.

  • You can assign permanent tasks to an employee which gives you more time to attend to other obligations.

  • Theoretically, you only have to train an employee once, or periodically at best.

  • You can delegate other tasks and responsibilities to an employee while you or a member of the team is absent.


  • Business expenses are covered by you, the employer.

  • The cost of hiring an employee may be more expensive than hiring a contractor because you may be required to pay for health benefits and paid vacation time.

Hiring a Contractor


  • You are not responsible for providing health benefits, workers compensation, vacation pay, retirement, or other benefits.

  • The contractor must cover their business related expenses.

  • According to Businessweek Magazine, the cost of hiring a contractor can cost about 30% less than hiring an employee.

  • In some cases, you may pay a contractor more per hour per job, but you could save a significant amount of money overall since you don't have to pay an annual salary or provide a benefits package.

  • If the independent contractor is not working well for your company, it is normally easier to let them go than it would be to let an employee go.


  • Working with contractors has been shown to increase the risk of being audited by the government.

  • Independent contractors come and go, making it difficult to cultivate loyalty with these workers within your organization.

  • Depending on the nature of the work your independent contractor completes—such as freelance writing, for example—may be owned by them. You can require that all work completed on behalf of your company be your intellectual property by outlining expectations in a written agreement signed by both parties.

Now that you have read and grasp the differences between an employee and a contractor, we hope you are ready to make an informed decision that best suits your organization. Making employment decisions for your business is not always easy, but ultimately, you must know what your goals are to help you make informed decisions about the staff you should hire to help you reach your business’ accomplishments. 


Karen McGee

Karen McGee, Sr. HR Generalist, joined SWBC PEO in 2014 bringing with her a Bachelor’s degree in Business from Wayland Baptist. Karen comes to SWBC PEO with over 25 years of human resources management experience. Prior to joining SWBC PEO, Karen worked as a Human Resources Business Partner for a large utility company in San Antonio.

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