Employees vs. Contractors

A company takes on significantly more overhead when it hires an employee versus when it hires a contractor. So much so in fact, that it surprises me how willing young companies are to go directly to hiring employees instead of working with contractors.

Health, vision, and dental insurance are the bare minimum at most companies and most will have some form of 401K, stipend, and other benefits… So what does the company have to gain from getting an employee instead of a contractor?

An answer I often hear is that being an employee is what most individuals prefer and that it instills a kind of “loyalty” to the company since there isn’t a fixed date when the relationship between the company and the individual is scheduled to end like with a contractor. I don’t buy the loyalty argument, but people certainly prefer being an employee to being a contractor.

Why? Uncertainty and laziness, probably. Would you rather have to source your own (and dependents) insurance, keep track of multiple 1099 forms, and have an impending date in mind for when you’re going to stop being paid? Or, you know, have none of those and let your salary and benefits be taken care of by someone else? Seems like an easy choice…

The one thing that is universally true is that most americans hate, absolutely hate, uncertainty. So much so, that the vast majority of them live off of W2 income and never, ever, have another source of revenue for themselves.

I’m not claiming this is a bad thing. However, I do think it would be beneficial for organizations to think about how their work scheduling process would change if all of their work for the coming quarter (or year) would have to be done with contractors. A quarterly (or yearly) employee review process is fine, but that misses the point of scoping work.

There’s a level of rigor that comes with planning a job for a contractor that doesn’t come with an employee. The tacit (and often incorrect) assumption by an employee and organization is that the employee will be around if the project runs late. With a contractor, you are forced to come to terms with the fact that they are not by any means guaranteed to be around if you mismanage the time.