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I think it depends on the activities we are delegating, and how these activities relate to the project and/or vision of the company.
If thoroughly thought out, the answer to this question can be quite complex. With this in mind, I will answer the broad issues that come to my mind when I think of this topic.
Independent contractors or outsourcing to specialized companies can be a good idea when we are delegating stand alone tasks that are part of the business process, or a business process which is not vital for the company.
These are some examples of crucial processes for me (I would delegate to company employees only):
- the security level of the information the agent will be handling during a given process is high, and it is important to keep this information private
- long life projects that require those involved in it to be familiar and proficient with the various tasks and the overall objectives of the project
- project supervision
These are some examples of projects I feel comfortable delegating to independent contractors:
- design of a landing page for a marketing campaign
- social media management
- loan processing (reputable independent contractor required with certification and good credentials)
- pr management
As mortgage lender, there are some processes that are vital to our operation, like underwriting, compliance monitoring, and accounting. We are not very large, and we cannot afford to have a fully staffed, the whole works, marketing department. So we may hire independent contractors to help us with online marketing, social media management, pay per click management, etc. As the contractor renders results, these are incorporated into our operations, and if one contractor fails we can move to another. If one contractor is good, we continue to use him/her.
For example, we are growing our network of branches, and we want to broadcast our mortgage branch opportunities, and promote that we are a better alternative to the traditional mortgage net branch. The project has a final aim, to recruit new branches, but many objectives are part of the overall project. We have hired independent contractors for the different objectives; the search engine online marketing, the social media marketing, the mail marketing, etc. Then an employee is in charge of supervising and managing the independent contractors.
Thanks for sharing your views & experience with us! This is exactly the kind of input I was hoping to get.
Does anyone else have any thoughts on employees vs independent contractors?
I would suggest a business owner to 1st, read up on what the IRS defines an independent contractor to be and couple it with the work you need individuals to do for your company.
One basic rule of thumb for determining which one can benefit your company best is deciding who will be providing machines, tools, materials, etc. to get the work done. If its a job in which you must supervise, monitor and control...you just might find a W2 employee is what you have on your hands.
My company falls in the independent contractor work for more than one of the classifications found under the IRS determining factors. I can honestly say its less of a burden for taxes and liability reasons, but the contractual part of it all is paper intense.
Thank you for sharing such great advice!
You raise a very important point. Final decision will definitely be influenced by IRS requirements.
When you say " the contractual part of it all is paper intense" you mean you have to use long contracts?
Do you use more than one contract? What clauses do you think are the most important between the business and the contractor?
YES, we do two contracts. One general agreement and one non-disclosure.
Clauses that are important should include contract service terms (from, until), what materials/tools are required for the contractor to provide to get the job done, and terms on how either party can cancel/exit the contract (if need be). Also, payment information.
Hope this helps.
It is more than the IRS rules. Check the rules in your state since they could come to different conclusions than the IRS, especially under audit.
Which do you think is better, an Employee or an Independent Contractor?
Both have advantages & disadvantages. Holding out taxes, being responsible for Worker's Comp, being held responsible for unemployment benefits to name a few.
Which do you prefer for your business?