Contract Labor Vs Part-Time Labor Chron.com

In addition, with a contract employee, you typically don’t have to offer other benefits. This includes retirement benefits, health insurance, and paid time off. This is a form of compensation that is typically offered to full-time employees. Therefore, you have to calculate the cost of all benefits you pay full-time employees, even if they are not included in their salary. The employer must pay payroll taxes for each of their full-time employees, as well as provide them with certain legally required benefits.

• Beyond receiving benefits, full-time employees get to know their coworkers and build relationships and networks throughout the workplace in ways that contract employees do not.
• These laws generally include a list of circumstances that allow for termination and the required notice periods.
• Plus, find a cost comparison for each approach and answers to commonly asked questions.
• These workers may make more money than part-time employees in the short term; however, they also have to pay self-employment taxes on their earnings, which can add up over time.
• W-2 employers cover much of your tax burden before you get paid, so you may not even be aware that they’re covering such a big cost.
• That means the fee you pay for their work may actually be higher than the hourly rate you’d pay a full-time, salaried employee.
• Only the employee portion of FICA taxes comes out of a contractor’s wages.

The Affordable Care Act (ACA) requires that employees who work 30 hours per week (or over 130 hours per month) must be given the option to receive health insurance benefits, or the business may risk fines. A few years after when I was ready to go full-time, I was offered a contracting position. It felt like I was part of a company, but did not have some of the perks that my co-workers had. I didn’t get invited to their events, participate in training and found that some of the things they discussed in the internal meeting, inapplicable to me. But, I got paid a lot higher which gave us independence in managing our money without any overtime and weekend work. If you have enough employees for a group health insurance plan and want to offer the best healthcare coverage to your employees and contractors, you should take your time and shop around.

Employment laws and employee benefits

In a general definition, an employer will hire part-time employees to work fewer hours than a full-time worker. Part-time employees are usually seen in retail, customer service and food service jobs. For many companies, part-time work is considered 30 hours or less per week; however, the Fair Labor Standards Act (FLSA) does not specify the exact hours of full- and part-time employment. The primary distinction contract position vs full time between contract employees and full-time workers revolves around differences in the employer-employee relationship and tax liabilities. If your contractor position is 1099, then you’ll need to account for all of those additional costs that you’re responsible for as your own employer. In that case, a quick-and-dirty rule of thumb is you should add 50% to a W-2 wage to find its comparable 1099 wage.

• Today, contract work is a viable way to earn a great wage, have more time to do what you love off the clock, and gain experience working with different companies and in various positions.
• This compensation can vary and is usually delivered to them after services are rendered.
• Independent contractors, however, are not entitled to mandatory benefits by law.
• Employers pay income taxes and statutory contributions on their employees’ behalf, such as for social security and health insurance.
• I transitioned because my family was growing, my children got older or I wanted to pursue a passion.
• Employees are protected by several federal and state labor laws, which can cause legal and financial setbacks for some companies.

Companies like Uber and FedEx have run into issues regarding contract employees. As with most decisions, there’s no choice that’s always right when it comes to contractors versus employees. Are you looking for a specialized worker or someone with a more general skill set? Only by asking these questions and considering all the various factors can you make the right choice for you. Just as importantly, a high rate of turnover makes it difficult to establish a strong corporate culture, an attribute correlated with long-term success.

You Need Specific Expertise or Skills (Quickly)

As tempting as it might be to hire a full-time employee when you need help, realize that it’s not your only option. For instance, say you initially launched an MVP version of your website using a WordPress theme. Some founders would hire a full-time designer anticipating that they’ll need ongoing design work after the initial project. If you want to bring in someone to supervise and train, then a full-time employee makes more sense than a contractor. On a similar note, being a full-time employee requires a higher level of commitment than being a contractor.

Hourly employees typically work a preset schedule, then punch a time clock or use a timesheet to log hours. Salary employees might be paid a set amount per period, regardless of the exact number of hours they work. Either way, however, both employee types will receive their paycheck in accordance with a consistent weekly, bi-monthly or monthly schedule. It isn’t unusual for an independent contractor to be working on projects for several clients at any given time. Frankly, they generally have to in order to make ends meet; simply by virtue of being independent, the contractor is likely to hold less loyalty for any single company.

What Do Employers Need to Consider when Hiring Contract or Full-Time Workers?

A southeastern Ohio native, Justin Johnson is a finance professional with accounting and financial planning experience in various manufacturing industries. He discovered a love for writing as student at Pensacola Christian College and after learning many lessons in the workplace, he enjoys writing business and finance pieces. Are you considering leaving your current IT job for new opportunities? Check out our free IT job search resources and join us as we compare contract and full-time employment to discover their unique advantages and disadvantages. Also, by choosing which projects you accept and which companies you work for, you can gain a wide range of experience across different industries or opt to cultivate one specific niche within your chosen field.