How to Work with Employees and Contractors

Jan 30, 2017 by Lina Vashurina, Ecwid Team
How to Work With Employees and Contractors
Posted Jan 30, 2017 by Lina Vashurina, Ecwid Team

Once you’re ready to start scaling your business, you’ll have to start thinking about hiring extra help to handle the various tasks that you simply can’t handle on your own anymore.

The question is: should you hire employees, or are independent contractors the right avenue for you?

The answer to this question depends on several different factors, such as the amount and regularity of work, whether or not it’s a specialty task, and, of course, your budget.

You can invite both employees and contractors to manage your Ecwid store using Staff Accounts.

Let’s take a look at the decision-making process for hiring an employee vs. a contractor.

Defining Employee Vs. Contractor

First things first. Let’s get on the same page about employees and contractors and how they’re different.

An employee is someone who performs duties as dictated by others, is given training for work to be done, and works only for one employer. They also have set working hours, a set pay rate, and are told how work is expected to be completed.

contractor sets his or her own hours, decides when and how they’ll tackle assignments, keeps individual business records, and invoices for work completed. Often times contractors have more than one client at a time and advertise his or her services, and operate under a business name.

Why this matters: misclassification of your hired help can result in legal and tax implications — including owing back taxes, reimbursing for missed wages, providing benefits, and more.

Choosing the Right Option for You

You’ll want to invest some time into thinking over which route will be the best option for your business personnel-wise and financially.

The Small Business Administration recommends starting by asking yourself the following questions when deciding whether you need an employee or contractor:

  • Are the tasks associated with the role an integral part of the business?
  • Is the working relationship an ongoing, permanent one?
  • Is there a significant investment in startup equipment required?
  • How much control do you need over the task at hand?
  • What are the contractor’s opportunities for profit and loss?
  • How much initiative, judgment or foresight is required for the success of the job?

From here, take this information and weigh the pros and cons of the two different working relationships.

Employees

Pros: Full-time employees will work 30 hours or more per week and have a long-term investment into your business and its end goals. As part of your team, they have more ownership of company objectives and feel more secure in their roles. Hourly wages can often be lower than contractor rates, and you’ll always have someone on call for new tasks rather than looking for help when the need arises. There are also opportunities for training with employees, so you can show them exactly how you’d like things to be done.

Cons: With employees, you’ll be expected to pay taxes and withhold Medicare, worker’s comp, and social security. You’ll also likely need to offer benefits like health care and paid time off. Additionally, you will need to file specific payroll paperwork and are responsible for training and required licensing, as well as providing equipment related to the job.

Contractors

Pros: Because you don’t have to pay a salary or benefits, contractors can be more affordable for on-demand work. They are more flexible, and if the relationship doesn’t work out, you aren’t tied to working with them again. Often times you can hire a contractor that’s a subject matter expert who specializes in a specific skill rather than opting for a more general employee with more breadth than depth in their skillset. Additionally, they’re responsible for having their own equipment and licenses, which again means lower expenses for you.

Cons: Because they often specialize, contractors have higher hourly rates than an employees expect, and you lose some control over how tasks are completed. You also can’t expect them to be on-call for your business, as they are part of their own business, not yours. Their availability is based on managing several different clients at once, so you may have wait times, and they often feel less loyal to your company brand overall.

Roles for Employees and Contractors

A big part of the decision-making process around which option is best for you will depend on the type of role you’re trying to fill. For e-commerce businesses, here are some common tasks employees handle, as well as some that are commonly contracted out.

Common Employee Roles

  • Marketing manager
  • Product specialist
  • Sales associate
  • Order fulfillment
  • Customer service
  • IT/Web oversight
  • Editorial oversight

Common Contractor Roles

  • Copywriter/content writer
  • Social media manager
  • Email marketing specialist
  • Virtual assistant
  • SEO/PPC specialist
  • Web design
  • Graphic design
  • Marketing consultant
  • Photographer

As you can see, broad roles are typically for employees who can devote all of their working hours to many different tasks, while contractors are usually brought in for more specialized jobs.

Tax Forms for Employees and Contractors

The documentation for these two types of relationships are different, so it’s important to know what forms you’ll need to prepare for them during tax season.

Contractors paid more than $600 during the tax year should send you a completed W-9 and be sent a Form 1099 from you. The Form 1099 is what the IRS uses to track individuals’ miscellaneous income and for business owners to keep track of payments made to contractors.

Employees are filed as Form W-2, and should be setup to withhold and pay taxes. Benefits will also factor into this form as well.

If you’re worried about getting your taxes squared away, you can work with an accountant, or use a financial tool like Gusto, which can automatically generate some of your required tax documents.

Also read: Why Do U.S. Sales Tax Rates Vary So Much?

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Finding the Right People

Finding Employees

Creating a top-notch job posting will help you attract the best possible candidates for your full or part-time role. Be as specific as possible when crafting your job description, include your company mission, and ask for samples of relevant work when necessary.

Once you’ve put together the job description you need, consider posting it in local newspapers, on online job boards, on your website, and any other places you feel are a good fit.

When evaluating applications, look for people with past experience, strong communication skills, and people who seem genuinely excited to work with you. Keep in mind that hiring family and friends works well for some people, but that other times it can be a recipe for broken relationships.

Finding Contractors

A great place to start looking for contractual support is through your existing networks. Put out an ask people you know and see if they can recommend someone they have worked with in the past. Send a few emails, make a few calls, and put out your query on social media, too.

If nothing turns up through these avenues, go to the places where you’ve seen fantastic work. For example: If you know of another e-commerce retailer with excellent photos and you need to hire a photographer, ask if they can connect you with the person they used.

As a last resort, there are also contractors-for-hire sites like Upwork and Fiverr, but be wary of people with extremely low rates, as this may be a reflection of quality.

Learn more: 5 Profitable Ways to Spend $5 on Your Business

Employees and Contractors: Scale Your Business With the Right Help

Depending on which aspects of your online business need the most urgent help as you grow your business, working with either an employee or contractor can help you regain your sanity and more effectively delegate tasks. Consider the pros and cons of each option, as well as factors like your budget, expertise needed, and the longevity of the relationship.

It’s tempting to take a “do it all” approach to your business, but hiring support help is essential for sustainable growth. If you want your business to succeed, don’t burn yourself out by overloading yourself. Hire the help you need.

About The Author
Lina is a content creator at Ecwid. She writes to inspire and educate readers on all things commerce. She loves to travel and runs marathons.

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