The Inside Scoop! When should I hire a Contractors vs. an Employee??
Robin and I hear this all of the time::
“I feel so overwhelmed! I want to pull my hair out because I have so many things to do. I know I should be acting like a CEO, but I am stuck in the day to day of my jewelry business. I know I need help, but I don’t know how to get there. “
Honestly, I felt that way too, especially when I was just starting my first jewelry business (and more recently as my jewelry business and F&TA have grown). I hired my first independent contractor just 6 months into business. I knew it was time, because I wanted to be working on high-level activities rather than producing my orders.
When your jewelry business starts to grow, it’s important to start letting go of all the hats you wear. You might want to consider hiring employees or contracting out the work to others. It’s hard to know which is right for you!
We came up with a simple framework to determine which is which.
What is an independent contractor and when is the right time to hire one?
Independent contractors are individuals (or businesses in certain cases) who work for your jewelry business on an as-needed-basis. Generally, they must follow certain criteria amongst others in order to be considered an independent contractor.
Some of the criteria are as follows:
• They use their own tools to complete the job
• They set their own hours
• They work off site and not on your premises
• You give them work but they determine the details of how the work is completed
• They are paid by the project or by the hour and they invoice you for the work completed
• They pay their own taxes and you send them a 1099 at the end of the year for services rendered
For your jewelry business, an independent contractor might be someone like a social media virtual assistant or an individual who works from home who assembles jewelry for your business. Typically these people work for several businesses in addition to yours.
If you are hiring someone as an independent contractor, it’s important to have him or her sign an independent contractor agreement. You may also consider having him or her sign a Non-Disclosure Agreement to protect any proprietary information they might learn.
What is an employee and when is the right time to hire one?
Employees are individuals that you hire for your jewelry business. Typically, they work on site or at a location determined by you. You set their hours, tell them how to complete the job and delegate their responsibilities.
Some of the criteria are as follows:
• They have set hours and come to work on location
• They use your tools and equipment to complete the job
• You tell them specifically how to do their job
• They are paid a salary or hourly rate
• They have benefits privileges
• Your company pays employment taxes in addition to withholding taxes from their paycheck
It’s important to know the laws in your country regarding employee vs. contractors.
For US based businesses, here are some general guidelines provided by the IRS to determine the difference between contractors and employees.
Both scenarios have their benefits. For instance, hiring someone as an independent contractor can be beneficial because you don’t have to commit to a certain number of hours. The drawback is that unlike an employee, you’ll be at the whim of their schedule and may miss deadlines if you aren’t prepared enough in advance.
We hope this cleared up some of the confusion for you. If you are considering taking on extra help (which we both think will help take your biz to the next level), make sure you are hiring legally and are following proper guidelines determined by the IRS and the laws of your country. (We know we have an international community here).
We have a gift for you budding jewelry CEO’s. Download completely for FREE our Best Practices Guide for a Kick-Ass Jewelry Biz and Life.
We want to hear from you! Below this post, tell us the following:
1. What are you ready to delegate in your business?
2. What steps will you take to delegate and hire an employee or contractor?
I’m ready to delegate! @flourish_thrive gives the inside scoop on employee vs contractors via @handmadeology (enter a link)