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NEW YORK – Even though the economy is still suffering and many small businesses won’t be hiring for some time, some companies are thinking about taking on more workers. The question for many is, what kind?
Some business owners will hire full-time or part-time employees, while others will consider going the independent contractor route. Temps are another option.
Each kind of worker has pros and cons. Here is a look at what employers should consider:
An owner has the greatest responsibility for employees given staff positions. There are many federal and state labor laws to be aware of, and expenses like employment taxes and workers compensation insurance to be paid. If the employee is laid off, the company ends up paying for some of the unemployment benefits.
But for many companies, hiring employees is the best way to build for the long term.
“They’re going to think for the benefit of the organization,” said Arlene Vernon, president of HRx Inc., an Eden Prairie, Minn.-based HR consultancy.
The temporary employee, meanwhile, “is going to be clocking out at 5,” she said. And an independent contractor might be juggling jobs for other companies.
Anyone who has hired employees knows it can be an iffy proposition. When someone doesn’t work out, there are issues about how to handle the dismissal, and the search for a successor can take time.
Many small-business owners use independent contractors because they can be engaged for a specific project. Because these workers are self-employed, there’s no need to pay the taxes and insurance or provide the benefits
Some small businesses ask employees they had to lay off to work as independent contractors. That can be a huge plus, since the worker is already familiar with the company.
One of the downsides of an independent contractor is that a business could be competing with others for the worker’s time and attention. On the other hand, if they like the work and the pay, they’re likely to keep working with you.
There’s also a tax caveat to be considered. Because companies don’t need to pay employment taxes when they use independent contractors, the IRS is on the lookout for abuses in which a worker is called an independent contractor, but is being treated like an employee, such as controlling the place of work and the hours put in or too much supervision.
First, it’s important to distinguish between someone you hire temporarily and a worker who comes from a temporary staffing agency. Someone you hire for a limited time is still an employee under the law, so you’ll have to pay for taxes and insurance.
Someone from a temp agency technically is working for the agency, and so you don’t need to pay that money.
Many companies turn to temp agencies so they can try out a worker before committing to a permanent hire. The worker also gets to give the boss a tryout.
“They each have the opportunity to evaluate whether they’re a good fit and are meeting their needs,” said Jay Keegan, CEO of Adams Keegan, a Memphis, Tenn.-based human resources management firm.
And if the employee doesn’t work out, the company doesn’t have to deal with severance issues like unemployment insurance, Keegan said.
The minuses with temporary workers include the fact that they might not have the kind of commitment to the job as someone who knows the job is theirs. Temps can also be expensive, since you’re paying fees to the agency. And if you decide to take the worker on full time, you could be paying a fee in the thousands of dollars.
But, Keegan noted, the payment to the agency might be worth it if you’ve found a great worker.
