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Need Financial Advice?

Need Financial Advice?

  • Writer's pictureAdeola Mosanya

Contractor Vs. Employee

Updated: Nov 14, 2023

So your business is finally growing the way you want it to, and you are getting a steady stream of Revenue. But your workload is increasing as well and you are looking into building a strong team to take you to the next level. 

You can do one of two things: 

  1. Hire your new team member as an employee on payroll 


  1. Hire your new team member as an independent contractor

What’s the difference between both?


From a tax perspective as an employer you are responsible for  the employer portion of FICA, medicare, social security and unemployment taxes. These should be filed and paid monthly. Other costs to be considered are employee benefits such as Medical insurance and retirement matching contributions.

Hiring employees also means an increase in administrative costs as it requires resources to train employees. However, having a dedicated employee means that you have more oversight over the tasks performed for their position.


As a business owner you do not have to pay payroll taxes for contractors. Typically, a contractor is a freelancer who is not only legally bound to working for your company. You do not have to pay for administrative costs associated with employees and the individual is paid a flat rate  monthly based on the agreement between both parties.

Which should you go for?

If you are looking for a specific short term need in your business, it may make more sense to hire a contractor. It also depends on the skills you are in need of. Typically with a contractor you do not have costs associated with training. A contractor also makes sense if you are a small business with a very specific need but do not have the resources to hire individuals with high level skills as on a full time basis.


Photo byBrooke LarkonUnsplash


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