Independent contractors are cheaper to work with. We can hire them according
to our budget. They do not have any limitation how they want to work where as
an employee will do exactly he has been told by their respected manager or
the exact job given to him. Being an employee they had to work with certain
limitation.

I think sometimes it's easier to just to hire out independant contractors.
Once I was in a position where I didn't have alot of experience in HR and was
just looking for someone to take the extra work off my hands for a fee, so
it's good for this but it soon gets costly.

I applied for employer status and started hiring my own staff but with it
comes more stress as you are taking resonsibilty for their income as well as
you own. Now I prefer business' that are easily scalable and very profitable.

http://www.stic.us/

I agree with just40fine. You have to make sure you follow the IRS guidelines on the distinction between an Independent Contractor and an Employee in the eyes of the IRS. One way to determine this is to consult a business lawyer to review any contracts for hire you have with your staff. Another way is to look closely at IRS Form SS-8. The questions it asks give you insight into what the legal characteristics of contractors and employees are. You can find that form here. The basic principle to look at is the level of control the employer maintains over the staff person. This control, according to form SS-8, falls into a few categories: Behavioral Control. The more the employer controls when, how and how much the worker works for h/er, the the closer the worker gets to being an employee. Also, the more the employer directs, oversees and evaluates the worker's performance. Financial Control. The more the employer is responsible for purchasing the supplies and materials of the worker, the closer the worker gets to being an employee. Relationship of the Worker to the Company. The more dependent a worker is on the company for things such as benefits, supplies, materials, etc., to do h/er job, the closer the worker gets to being an employee. Relationship of the Worker to Actual Sales of the Firm. The more the employer determines who, what, when, where and how the worker sells, the closer the worker gets to being an employee. Again, these are just guidelines and I'm not an employment lawyer nor an expert of IRS regulations. If you complete form SS-8, and send it in to the IRS, they will make the determination for you. This may be the best bet in some cases.

I think that it bears mentioning that you should be clear in hiring independent contractors that they really are IC's. Many employers run afoul of IRS regs. on IC's vs. employees. Not just small businesses, either.  A local municipality was employing all of their community service instructors as IC's and had to shut the program down because they hadn't planned for the additional cost of employees.

I would like to share my opinion differentiate. I think that hiring employees or use service from dependent contracts is depending on how much does the job critical to the business. If that job does not the heart of the business you may cast the work to subcontract to complete it and only waiting for returning results. But if that work is the key to your core business, whether short or long term you need to be the expert in it to maintain the position of excellence in that business. In this situation you need to take a superb job, control every process yourself and transfer your identical into your corporate. Sure, you have to hire staff, broadcast over the corporate culture to them. More over I think that having employees have more advantages in it that they are company's representatives, they take any action on behalf of the company. But you must have a strict work rules to manage them to behave neatly. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

Like everyone else, I've had a mixed experience with independent contractors.  Here's my $0.02:   Pros: Flexible labor allows for highly variable demand in business, without having to deal with employee hiring/firing as business changes. Ability to bring in expertise you may lack quickly Cons: Finding reliable/honest contractors is hard Finding reliable contractor vendors (e.g. recruiters) is harder If you can get your hands on a few really good ones, you're in good shape assuming you can keep them busy.  But I've had generally good experiences on my side with them.   Offshore contractors are a whole other ballgame...Personally, unless you have prior experience, I'd say avoid them at all costs.  The low cost hook isn't worth the lower quality in work, the increased time required to manage, and the communication issues you will inevitably encounter.

I think the company could lesser their expenses by hiring independent contractors as if there is no work there is no pay. However, we cannot assure their availability when we have urgent work. Veliki Brat - reality blog show. ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.

Advantage:  As for project execution, IC's streamline your hiring process.  The ramp up and ramp down periods are shortened.   Disadvantage:  Institutional knowledge may get lost unless there is a strong relationship with the IC.

I have had good and bad experiences with both independent contractors and employees.  What it really boils down to is the character of the individual and their work ethic.  Currently I am hiring all independent contractors because of the state of the economy.  I have lost a lot of clients over the last 2 years due to businesses closing, or operating on bare minimum.  I own a bookkeeping, payroll, and tax preparation service.  So I find that small businesses will hold off on paying for bookkeeping throughout the year.  Then at the end of the year, or when filing bankruptcy, or trying to modify their home loan, etc.  they find that they need financial statements & taxes in a hurry.  So my work load fluctuates extremely.  Unfortunately, I can't consistently pay an employee and provide a solid income that they can depend on because my work flow follows that of my clients.  With an independent contractor I can have the extra help that I need when I need it, with the understanding that I don't have long term employment for them at this time.  If my situation changes then we can look at making changes.  I offer a flat rate for the work completed with a deadline.  The right individuals will make $50-$100/hr. by completing the work efficiently way ahead of schedule.  Then they are free to earn other money elsewhere.  They do a good job for me and always have the opportunity of additional work when I have it available.  I like to build a lasting business relationship with a responsible individual with the capacity and drive to work independently & be involved in several projects as well as possibly refer clients to me through their other professional connections.  I believe that there is also a multitude of experience out there right now.  I can think of several highly qualified individuals who don't want to be either an employee or an owner of a business because it requires them to be there full-time.  They have children's schedules or they are retired, etc.  They want short term challenges that provide income and engage their intelligence, but aren't available to be tied down full time.  Of course you add to this the savings in insurance and taxes and it makes hiring independent contractors a clear choice for my type of business.