Understanding the Differences Between Hiring Freelancers, Contractors, and Employees

Understanding the Differences Between Hiring Freelancers, Contractors, and Employees
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Entrepreneur
Updated:
By Lyle D. Solomon
Very often, entrepreneurship starts as a solo venture or a partnership. But as the business expands, keeping up with client demands can be too much for any business owner to take on themselves. This is actually a good problem to have. Unfortunately, not everyone knows when it’s time to bring in extra help. The simple answer? If you are losing business, you need to make a change. Depending on your situation, however, hanging a “now hiring” sign may not be necessary. While hiring employees can certainly help, are they the right kind of help? With an evaluation of your needs, you can decide if hiring a freelancer, contractor or employee is right for you.

Fundamentally speaking, the major differences between freelancers, contractors, and employees lie in their relationship with the business owner. Freelancers and contractors are self-employed individuals, while employees are hired by the company. Freelancers and contractors typically set their schedules based on the needs of their clients and work out a payment schedule (typically upon completion of a job). Employees, however, work the schedule established by the company and receive a regular paycheck on a schedule set by the company. As a business owner, you are responsible for tax reporting on any payroll employees you have. But since freelancers and contractors are considered self-employed, they are responsible for reporting their taxes.

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