If you are planning on expanding your workforce, deciding whether to hire a new employee or contractor can be difficult. There are, of course, various benefits and risks associated with each of these options that could significantly influence your final decision. Before going ahead with your preferred choice, it is crucial that you consider these and fully assess the types of recruitment available to your business and the risks that each of them brings. By doing this, you will be able to discover the ideal solution for your distinct needs.
Hiring a Contractor
Contractors are becoming an increasingly prominent group in the job market, with almost one-third of Australians preferring the flexibility of freelance work. By temporarily recruiting a contractor, your business will likely be able to save on employment costs. While an employee may have a lower hourly rate than a contractor, you are also required to cover their holiday pay, insurance, sick leave, equipment and the like. This means that, in the long-term, the total costs for hiring a contractor will often be less than those of an employee.
Contractors provide businesses with a more flexible employment solution, being that they can be hired on an as-needed basis. Because contractors are specialised in the service they are offering they also, typically, require less management when completing assigned tasks.
It is, however, important to consider the difficulties that hiring a contractor can pose. When working as a contractor, it is not uncommon for individuals to be employed by multiple companies simultaneously. Because of this, they may fail to prioritise business objectives and appear less committed or loyal than an employee. It is also vital to note that, while they are required to follow set guidelines, contractors can often decide how best to complete the task for which they have been hired. For instance, if they prefer to work outside of normal work hours, this could negatively impact your communication capabilities.
Each business has different needs, priorities and objectives. As such, hiring a contractor will not always be the perfect solution and, in many cases, companies are better suited to alternative employment options.
Hiring an Employee
By hiring employees, you can support the development of a strong, loyal and dedicated team of individuals who have a shared vision for your business. Employees are often more invested in the long-term success of the company at which they work than an external source would be. With a comprehensive understanding of organisational processes, they also play a significant role in ensuring all company procedures continue to run smoothly.
By hiring an employee, as opposed to a contractor, businesses are able to keep everything in-house. This means that, during the day-to-day operations of your company, you can efficiently manage workloads and lead staff all while keeping private information secure.
While hiring an employee can offer many benefits to your business, there are still numerous challenges with this type of employment. Significant time and money must be invested in employees to ensure they are well equipped to perform their role, while also having access to required equipment and resources. You also risk hiring someone who is not a good fit for your business, which can often be difficult, costly and time-consuming to manage.
Regardless of whether you choose to hire an employee or contractor, there will be various insurance considerations that will need to be taken into account.
For reliable insights into how each alternative will impact your insurance and risk management solutions, speak with your insurance advisor.
Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.
The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.