When to Contract Out Work

Last week I talked about what makes someone an independent contractor and how you can help your clients understand that. You may also want to provide them with some guidance on the advantages and possible pitfalls of hiring independent contractors.

First, the positives:

  • Saving money – Cost is top of mind for small business owners. Certain independent contractors may charge more upfront, but without the costs of benefits and payroll taxes, your clients can potentially save overall.
  • Filling a niche – There may be specific things in a business that the owner wants to get done, but doesn’t have the resources on his or her staff to devote to it. Maybe it’s a marketing campaign, website update, database overhaul. These are niche projects that may be better allocated to a contractor with specialized skills who can take the burden off employees.

Potential negatives:

  • Reliability – Your clients can ask to see samples of a contractor’s work in some cases, but if something starts going wrong with a project you’ll have less control than you would with a full-time employee. You may find yourself waiting on calls to be returned or have trouble getting them to understand you and your company’s vision.
  • Hidden costs – Make sure you advise your clients to have clear agreements with independent contractors. They may charge extra for multiple revisions or work that they didn’t expect to be part of the project. Help your clients avoid getting hit with an extra charge late in the game.

Contracting out work can be a valuable resource for small businesses, allowing them to move faster and keep their employees focused on the core business. Let them know what they should consider before making a 1099 hire.

 

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Michael Alter, payroll expert with an MBA from Harvard Business School, is a nationally recognized spokesperson providing thought-leadership and sensible advice to help accounting and payroll professionals build deeper more profitable relationships with clients. Alter, President of SurePayroll, writes the Trade Secrets column on INC.com and is frequently published in Bloomberg TV, the Wall Street Journal, and Entrepreneur Magazine.

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