Contract vs Full-Time Employees: How to Make the Right Decision

Rather than staying at the office even when you are not productive, a freelance position allows you to work according to your responsibilities and get paid for the same. Experts project that by 2020, contract workers and freelancers will make up 40 percent of the workforce in the United States of America. Employers will lose valuable opportunities if they recruit one type of employee. Contract employees are not steadily employed by any single company. They complete one-off projects or are retained on an as-needed basis. This means contractors may not always be available to your business on a month-to-month basis, depending on their other projects. Here are the main differences between contract, part-time and full-time employees, and what employers need to know about hiring each.

Although salaried vs hourly debate often appears when it comes to the full time vs part-time discussion, how you pay your employee doesn’t mean much in terms of how they are classified. When paying salaried employees, the amount stated in the contract will be defined as a monthly payment and paid on a monthly or 4-weekly basis.

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Employees receive training from their employer to do their duties and have an ongoing relationship with their employer. Sign up now to receive expert advice on hiring, tax compliance and business management straight to your inbox. We think businesses are as unique as the people who run them. Get individualized content on the topics you care about most by telling us a little more about yourself. The individual or business that sends a contractor a 1099-MISC is also responsible for filing the 1099-MISC with the IRS by January 31 of the following calendar year. Business owners can also generate and file 1099-MISCs through Square Payroll.

An employee, on the other hand, is on your team — you’re their supervisor, responsible for their behavior and also reporting their taxes. Most employers who hire full-time workers are responsible for staff training. From the initial training to refresher courses, companies invest heavily in their full-time employees to motivate them and sharpen their skills. However, most freelancers are responsible for their own training. The good news is that they can choose the training that will enhance their marketability and earning power. While most people are familiar with full-time and temporary employment, we are beginning to see an increasing number of contract positions.

Employee Costs

In some cases, independent contractors are paid more per hour because of their expertise (and that’s what you’re hiring them for). Trying to figure out the difference between independent contractors and employees and when to use 1099s and W-2s can be confusing and overwhelming. Many part-time employees are not entitled to workplace benefits. If your workplace has 50+ employees, then you are obliged to provide 95% of them who work for 30 hours and more with health insurance.

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• An employee works directly for a company or another person and answers to an employer/manager.

Working 40 hours a week is a norm if you want to have a full-time job, although the number may vary depending on the employer. If you work less than 30 hours a week, you’re considered a part-time employee. It explains what contract employment and full-time positions mean and offers a detailed comparison to help you understand contract position vs full time what type of business relationship is the right choice. If your contractor position is 1099, then you’ll need to account for all of those additional costs that you’re responsible for as your own employer. In that case, a quick-and-dirty rule of thumb is you should add 50% to a W-2 wage to find its comparable 1099 wage.

When to choose full-time W2 employees

Finally, full-time IT employees have the opportunity to develop a deeper understanding of the technology they work with. In contrast to contract employees who have to learn new technologies and platforms on each project, full-time IT workers can become experts in their tech specialty or field. This technical knowledge combined with a strong understanding of the company, make full-time tech employees a valuable to asset to many organizations. At its most basic, contract employment implies that an individual has been hired to perform a specific job at a defined rate of pay. Typically, contract employment is limited to a set duration of time. A contract employee is not considered a permanent employee and they do not become a regular addition to the organization’s staff.

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