Should You Hire Employees or Contractors?
- canfield246
- Jun 27
- 2 min read
If your business is growing, you might be wondering whether it’s time to bring in help—and whether that help should come in the form of an employee or an independent contractor.
There’s no one-size-fits-all answer, but understanding the differences can help you make the best decision for your business.
What's the Difference?
Employees work directly for your business. You control how and when they work, and you’re responsible for withholding taxes, paying employer payroll taxes, and offering benefits (if applicable).
Contractors are self-employed. They control how the work is done and typically use their own tools and methods. You simply pay them for the finished product or service.
Pros of Hiring Employees:
More control over how work is done
Can train them to fit your exact processes
Long-term loyalty and availability
Cons of Hiring Employees:
Must withhold and pay employment taxes
Required to provide a stable workflow and possibly benefits
More administrative work and liability
Pros of Hiring Contractors:
Lower upfront costs (no payroll taxes or benefits)
Flexible and project-based
Great for short-term or specialized work
Cons of Hiring Contractors:
Less control over their schedule or methods
Risk of misclassification (which can lead to IRS penalties)
They may be juggling multiple clients
What the IRS Says
The IRS focuses on three key areas when deciding if someone is truly an independent contractor:
Behavioral Control – Do you direct how the work is done?
Financial Control – Do you control how they’re paid or reimburse expenses?
Type of Relationship – Is the work ongoing, and do you provide benefits?
So, What’s Right for You?
If you need someone long-term, want to train them your way, and are ready for the responsibility, hiring an employee may be the best fit.
If the work is project-based, specialized, or temporary, a contractor may save you time and money.
Need help figuring it out?
We help small businesses stay compliant and make smarter decisions.
If you’re unsure how to classify your workers—or what hiring move is best for your taxes—reach out here for a consultation:
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