Article: June Campbell

The Small Business Library

January 19, 2001

Need Help? Should You Contract Out or Hire?

Has your business reached the point where you need an extra pair of hands to get all the work done? If so, you are facing a decision. Should you hire an employee or to contract the work out? Obviously, if you require a full-time presence in your workplace, such as a receptionist, for example, then hiring an employee is your option. Otherwise, an independent contractor could be an alternative solution.

There are pros and cons to both approaches. Before making a decision, consider the following issues:

  1. Contractors usually charge a higher hourly wage than you would pay employees. They must bring in enough money to cover their overhead, operating expenses and the time they spend on administration and on marketing their services. Contractors also must cover their own health insurance and provide the benefits that are often given to employees as part of the employment package. However, contractors are more economical in the long run because you are not responsible for providing employee benefits such as sick leave, vacation, payment for statutory holidays, and other benefits that might be required by law in your area of residence. You are also not required to deduct taxes or other deductions as might be required in your country for employees. This means a reduction in bookkeeping time, with a resulting savings of time and money.

  2. If the contractor works offsite, you will not be required to provide office space or to supply equipment such as computers and fax machines. (Note: Depending on laws in your region, a contractor could be awarded legal employment status if he or she can argue that the work was done at your facility, using your equipment, and that you are the contractor's only client.)

  3. Given that contractors have other clients and other commitments, they might not always be available when you need them. An employee's availability is guaranteed.

  4. If a contractor proves unsatisfactory, it is simpler to replace him than it would be to replace an employee. In some areas, labor laws make it very difficult to terminate an employee without facing a lawsuit or some other penalty.

  5. If you are considering bringing someone on as an employee, contracting work out to them first will give you a feel for their performance and suitability.

Contracting out offers another possibility. When you contract with someone in a compatible business, you are able to offer your customers a fuller service while promoting one another. For instance, a web designer creates sites for small businesses and the site owners inevitably start asking questions about marketing or research. Getting together with someone who offers these services means that you won't turn down business and it might even help promote your web design business.

About the author: June Campbell's writing has appeared in several international print and online publications. Writing Services by Nightcats Multimedia Productions. The Roundup -- a FREE business ezine -- plus "How-to" Booklets, Guides, Templates, & eBooks, Business proposals, Business plans, Joint Venture Contracts... More! Visit to Claim Your FREE GIFT!