The Eagle Blog

Contractor Cost Versus Employee Cost?

As a staffing company we are often challenged by clients about the cost of a contractor versus an employee. At first glance the hourly rate paid to contractors may seem expensive – it can certainly look like a lot of money, particularly when multiplied by 240 days and 8 hours. But are companies really looking at all of the pertinent factors? Consider the following:

The contractor is ONLY hired when needed, and you ONLY pay for time on the job. Therefore you are NOT paying for:

· wait time, while budgeting is approved;
· vacation time;
· benefits;
· cost of training;
· training time;
· sick days;
· mental health days;
· maternity, long term disability or other such time;
· trips to the dentist; or
· any other miscellaneous reasons that reduce the productivity of the average worker.

Another cost rarely factored into the equation is management time. Any manager will tell you that HR issues will burn more time than any other management activity. There are really no significant HR issues with contractors, if there is a problem they are gone. No mess, no fuss, no severance!

One of the biggest benefits of using a contractor is that you have the pick of the market to ensure the person coming in has relevant skills. Often we force-fit employees to do a job because they are available. Contractors hit the ground running and get the job done quickly … the cost of missed deadlines needs to be potential factor too!

If you need a job done and are weighing up hiring or bringing in contract help, make sure you consider all of the facts. It’s a big corporate cost and commitment to hire people, and while contractors are not always the right answer, neither are employees!


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2 thoughts on “Contractor Cost Versus Employee Cost?

  1. An independent position (incorporated or sole proprietor) should never be considered an alternate way to employ someone. Your choice of course is whether you want to be a temporary employee or whether you want to keep looking for an independent position (usually better found through agencies)

    The most likely reason this company will not consider you an independent is because of the risks involved. Most companies will not have a direct relationship with an independent, because it creates risk for them of that person being declared an employee … resulting in back paying taxes, other deductions and fines for not following the rules.

    When companies DO use independents they do it through an agency that holds the contract with the independent. This maintains an arms length relationship and HELPS with the independence factor. (Obviously there is much more to this subject).

  2. An independent position (incorporated or sole proprietor) should never be considered an alternate way to employ someone. Your choice of course is whether you want to be a temporary employee or whether you want to keep looking for an independent position (usually better found through agencies)

    The most likely reason this company will not consider you an independent is because of the risks involved. Most companies will not have a direct relationship with an independent, because it creates risk for them of that person being declared an employee … resulting in back paying taxes, other deductions and fines for not following the rules.

    When companies DO use independents they do it through an agency that holds the contract with the independent. This maintains an arms length relationship and HELPS with the independence factor. (Obviously there is much more to this subject).

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