When we talk about staff, we have to discuss contractors vs employees. Contractors and employees can do similar work, but there are several legal (and tax) differences.
Here are a few questions to ask before making the decision between employee and contractor:
- Do you want to control what you staff member does and how they perform the job?
- Do you want to control when your staff member reports to work?
- Do you want to control aspects of the staff members job such as how they are paid or who purchases tools and supplies?
- Do you want to offer benefits, vacation, and retirement savings options?
If you want to be able to control when your staff works and how they perform their job, the IRS requires that you pay these individuals as employees which means they will be subject to employer and employee taxes.
If you would like to be able to offer your staff benefits such as paid time off, health insurance or retirement savings you will want to consider bringing these individuals on your staff as employees so that you can offer these types of employee benefits. Remember all employees are treated equally.
If you would like to have individuals work on the designated projects on their own time and submit regular invoices to your company than you will be able to pay those individuals as a 1099.
If you don’t currently have staff members, these will be the qualities to consider before making the decision. When you’re ready for this step, you’ll be able to make the decision based on how you will want to collaborate with others.