The Difference Between Independent Contractors vs. Employees

So you’re at the point in scaling your business where you’re ready to bring on team members, but should you bring on an independent contractors vs. employees? Or vice versa? First off, congratulations! That’s a huge step, and you’re one step closer to finally having more room on your plate to continue doing what you do best.

There’s a lot of confusion around these two, and it’s understandable! The line is so thin between what makes someone an IC or an employee, but that’s what we’re here to help you figure out. Keep reading as we dive into the differences between independent contractors and employees!

It All Comes Down to Control

The main difference between independent contractors and employees all comes down to control. Independent contractors have their own business as well, so you aren’t able to control them in the way that you could an employee.

We use “control” lightly because we don’t mean you should be bossing them around (after all, the goal is to be a coach, not a boss), but that’s essentially what it boils down to.

Control Differences Between Independent Contractors vs. Employees

• Employees have set office hours that they work. Independent contractors don’t or may not, and they can work on their own schedule.
• Employees can work remotely, but they’re usually local and work in person. Independent contractors can (and usually do) work remotely.
• Independent contractors are able to hire or outsource their own assistants/subcontractors for work at their discretion.
• Employees can be hired and fired at will. There are contractual obligations that must be upheld with independent contractors, usually being at least a 30 day notice before parting ways.
• Employees are usually trained and you’re working with them to expand their skill set. Independent contractors have already done their own education and grown their skill set. Unless you’re wanting to teach them how you specifically like something done in your business, 9 times out of 10, they already know how to do it.
• You’re providing the equipment, software, or materials for the employee. Independent contractors will have their own. (For example, when outsourcing a contractor for graphic design, they already have the design software. Or when working a wedding, independent contractors will likely bring their own stuff.)

Why It’s Important to Know the Difference

It’s extremely important that you know and understand the difference between independent contractors vs. employees to avoid any misclassification, which could lead to big problems and big money being owed to the IRS. You should be clear on these differences and be sure you’re treating your independent contractor or employee appropriately. 

To be sure you have your classification straight before hiring, be sure to complete the IRS 20 Factors test. Head here for more information about this test.

Which Type is Best for Your Business?

Unfortunately, we can’t tell you one way or the other which you should aim to hire. They each have their own pros and cons, and it’s up to you to discern who you want to bring onto your team. It’s important to remember that there isn’t one that’s better than the other. It surely all comes down to which you think fits your business the best and what you prefer.

So, are you thinking of hiring an independent contractor or an employee? We’d love to hear about it in our DMs on Instagram @theabundancegroup!

If you need more assistance with building a team, be sure to read all about our Building Your Team Intensive to see if it’s right for you. During this 12-week program, we’ll walk you step-by-step through the process of changing your mindset to one of leadership, where to find talent, how to create SOPs, the legal and payroll process, and so much more!