OD Chatter: Should My First Hire Be a Contractor or Employee?


Solopreneur with Business Pains: Hiring First Employee

Dear OD Chatter,

I am a solopreneur and am looking to grow my business and hire my first employee.

I am looking for this person to be local and do training in person for a few weeks and then allow this person to work remotely after that.

This is a VERY part time position to start with but will allow for additional hours as the needs of the business progress and if the person is interested in absorbing more hours. To start with I am really only looking for this person to do an hour or two a day. (Approximately 20+ hours per month)

As the need of the business fluxgates, and I gain or lose clients, I may need to temporarily halt services, although the way my business is growing I don’t anticipate that to be the case.

My question is, under these circumstances, should this be a contract employee or a payroll employee?

I’ve considered going with a temp agency, but I’m concerned that with the length of time I train someone, they would end up leaving anyway.

Any advice or suggestions you can offer are greatly appreciated. Thank you!


New Business Owner, Greater Detroit Area

Dear Solopreneur,

Congratulations on your growing business! Cheers to you for courageously entering the world of commerce, enjoy it!

The difference between employee and contractor centers around two many issues: the taxes that are paid to governmental agencies and the control you have over the way the work that needs to be completed.

Hiring an employee requires that you also pay a matching social security tax, unemployment taxes, and provide workers compensation coverage. Being a small employer, you do not have to offer medical benefits nor any paid-time-off benefits if it does not fit into your budget yet.

Using a contractor under a 1099 tax form requires that THEY pay their own payroll related taxes and since they are not an employee you will not have to cover unemployment taxes nor would you have to cover their worker’s compensation — saving you the cost of those expenses.

Another consideration is the control over the work. A contractor is free to accept other assignments and may not be available when you want them and need them. Keep in mind that a contractor is in business and they are watching their risk/ cost just as you are in your business.

I would also be concerned about the training that you need to do. In a perfect situation, you don’t want to have to pay someone during their training period, just to have to do that training over and over again for new employees or for new contractors.

In many ways, using a temporary agency is a good idea but only if the work you need to have completed is general in its nature. This is good only if the work is not specialized and is something that the average clerical person would be able to perform without much instruction. An example would be work that requires using the MS Word program. That skill is not specialized and an agency would be a good idea.

A great option would be to seek a paid-intern from one of you local colleges. You will get a strong mind, an eager personality, and someone who may not be able to work full-time right now. However, upon their graduation, you may be in a position to bring them on full-time. If you don’t already have an existing relationship with a university, just call your local university and speak with their career development office, they will be so happy to assist!

Thank you for sending your workplace question to OD Chatter!


OD Chatter

OD Chatter (www.odchatter.com) is written by Debra Dee Bradford, CHRO of ODL Business Partners, Inc. (www.odlbp.com) an HR consulting firm specializing in organizational development and leadership training. To reach Debra, submit questions, or make comments please email dbradford@odlbp.com.




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