The beauty of a growing business is not only increase revenue, but the ability to hire people who can share the workload and help complete projects. Some businesses just starting to take off aren’t ready for full-time employees but could benefit from hiring an independent contractor.
To help you determine if hiring an independent contractor is the best route for your business, review our blog post: Do You Need an Employee or Independent Contractor? If you’ve determined that a contractor is the best solution, learn about the benefits below.
The IRS defines freelancers or gig workers as “independent contractors.” For each person you wish to employ, you should run through the IRS 20-Factor Test to determine whether they would qualify as an independent contractor or as an employee.
Hiring an independent contractor means that you have the ability to direct or control the result of the work, but the contractor has the ability to control what they will do and how it will be done.
Hiring an independent contractor will give your business the following tax benefits:
- Income tax is not withheld.
- There is no withholding of Medicare taxes.
- There is no withholding of social security taxes.
- You can simply provide each contractor you pay over $600 to with a 1099-Misc.
Not only are there tax perks and no need to provide insurance, benefits or bonuses, but with freelancers, you also have an easier time finding qualified and experienced workers to do just about any job.
Freelancers, typically, have a successful work history and have opted to go out on their own to have more control over their work. Use reputable staffing companies to find sales and marketing assistance, design work, or web development specialists. These days, you can find a freelancer to fit almost any role you need to fill.
Freelancers are perfect when you don’t need an employee working a 40 hour week or when you don’t even need a part-time worker. They’re the best option when you need hired hands per project, per hour, or for professional work. Pay them to do specific tasks, and then beyond that, you don’t owe them a duty to provide work or work security. You can hire as many freelancers as you need to accomplish your business goals and fit within your budget. In addition, contractors can complete the tasks you need unsupervised and often off-site so you can concentrate on running your business.
Hiring an Independent Contractor
If you’ve decided that an independent contractor can help both you and your business, here are items to put in place before you hire:
- Put deadlines in writing.
- Ensure that the contractor has the tools-like software-required to complete the tasks.
- In writing, make clear that the contractor will not be receiving a salary, health benefits, or other benefits that a full-time employee might have.
- If possible, put your full agreement in writing, and include a confidentiality agreement if you will be disclosing confidential business information.
- Set up a timeline for touching base if you will be hiring for a long project.
- Run a background check.
If you’ve found that your business has grown beyond what you can keep up with, you need specific expertise, or you want to grow your business with some extra help, then it’s time to consider hiring someone. Hiring a freelancer will give your business the help it needs while saving you money in taxes and preventing unneeded work. Be sure to use job sites to locate qualified workers and take the steps to ensure the business relationship is a good one.