EnTrends

The time comes for every successful home-based business
owner when one person can no longer do it all. In the early
days of your fledgling business you accepted that not only
were you CEO, CFO, COO, secretary, treasurer and marketing
director, you also had to be laborer, receptionist, janitor,
chief cook and bottlewasher. That is simply what you have
to do when starting out. In fact, I'll bet you worked harder in
your "little home business" than you ever did in your former
life as corporate whatever, right? But now the time has come.
You have successfully taken your business past the initial,

maddeningly slow, frustrating start-up phase to the point
where you're seeing some growth ... so much growth in fact
that you're finding it near impossible to keep all the balls in
the air.

The time has come to hire some help. OK, but what kind of
help do you need? If it's a secretary/receptionist, that's easy.
You go out and hire yourself a competent employee. But
what if it's someone to carry out specific projects such as
designing a website for a good customer you just can't
service within the timeframe the customer needs? What if it's
someone to create a marketing program to launch your
business to the masses? What if it's a bookkeeper to handle
your accounts payable, receivable and everything else in
between? The difference between these types of activities
and our secretary/receptionist example is that the former are
all specific projects whereas the latter is not.

When considering whom to hire for your project work, you
have a choice ... hire a full-time or part-time employee or hire
an independent contractor. By the time you include all the
add-on costs of hiring an employee (in addition to wages or
salary you need to add on federal and state payroll taxes,
social security tax, federal unemployment insurance tax, state
unemployment insurance, workers' comp premiums and
employee benefits, not to mention shelling out for office
space and equipment), hiring an employee becomes a
relatively expensive option compared to hiring an
independent contractor to do the same work. The add-on
costs of hiring an employee usually add about 30-40% to the
bill. In other words, if you pay your employee $10 an hour,
you'll really be paying $13 - $14 an hour once you include all
the add-on

expenses.

In contrast, although you usually pay an independent
contractor more than an employee, that cost will still be less
than an employee with the add-on expenses. You may pay an
independent contractor $12 an hour without any additional
charges. Sound good? Well, read on. It's not as easy as it
looks.

WHAT IS AN INDEPENDENT CONTRACTOR?

So, what is the difference between an employee and an
independent contractor anyway? Quite simply, an
independent contractor is someone who contracts with
someone else to provide specified services for a set price on
terms and conditions outlined in the contract.

For example, let's say you hire a gardener to mow your lawn
and get rid of weeds once a week. Your contract (whether
written or not) is that Joe Gardener will arrive at your house
on Friday morning, mow your lawn, get rid of weeds and
generally tend to your garden. In exchange, you agree to pay
Joe $40 for this service each week. Joe supplies his own
lawnmower, hedge clippers and weeding tools. Joe decides
what time he arrives and how long the job takes (within

reasonable parameters). You do not supervise Joe in his tasks
or dictate to him how they are to be done. Joe is an
independent businessperson and you treat him accordingly.
The final product is either to your satisfaction or it isn't.
When he's finished, you pay him if you're satisfied with the
end result and you don't pay him if you're not.

Contrast this with an employer/employee situation. Let's say

you own the business Joe's Gardening Service. You employ

three employee gardeners to perform services for your
business. As the gardeners' employer, you pay them a fixed
wage and you withhold taxes, unemployment insurance and
various other benefits from their wages to remit to the
appropriate government agencies. In addition, you provide
your employees with the tools and equipment they need to
perform their work. You tell them what to do and supervise
them while they're doing it. At the end of the job they get paid
by you whether your customer is satisfied with the job or not.
In other words, although your customer may not pay you (the
independent contractor) because she is dissatisfied with the
work performed by your employees, you must still pay your
employees because they are not independent contractors -

they are your employees and are entitled to be paid a fixed
wage. If you are dissatisfied with their work, you can fire them
but you can't decide whether to pay or withhold their wages
based on the end result of the particular project.

ADVANTAGES OF INDEPENDENT CONTRACTORS

=> Cost

As mentioned above, the main advantage of independent

contractors versus employees is cost. You can get the same

or better service from independent contractors for a lower
hourly rate than you can from employees because you don't
have to incur all the add-on expenses that go along with
hiring employees.