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Making the right hire – Employee vs independent contractor

Contractors vs Employees

Over the last decade, there has been a substantial increase of as much as 40% in the hire of agency workers and short-term contractors. This can be explained by a variety of factors including the trend towards a gig economy and the increasing need for flexibility for both employers and their staff. Depending on the nature of your business and the market in which you operate, making a move towards a more flexible staff base can be beneficial for your long-term business goals. It is therefore important to understand the benefits and downsides of hiring different types of workers and to make a decision based on which best fits the needs of your business.

Benefits of Hiring Employees

  • Employees work under a contract of employment which generally provides that an employee must give notice before terminating their employment. This allows the employer to have a greater degree of continuity in its workforce and also allows them time to find a suitable replacement. This may be important if the employee's role is essential to your business.
  • Employees cannot choose when to reject or accept work; this provides the employer with a greater degree of certainty which can be crucial during particularly busy periods.
  • Employers are responsible for directing their employees, as well as setting their working hours and place of work, which allows employers to have a greater degree of control over what their staff is doing, how they are doing it, as well as where and when they are doing it.
  • Employees are more likely to gain an in-depth and holistic knowledge of your business because they tend to be with the business longer and work across different departments and have instilled in them a sense of loyalty to the business because it is providing the employee with long-term and stable employment.

A few things to keep in mind:

  • The law implies certain obligations into contracts of employment which an employee and an employer must comply with such as the duty of mutual trust and confidence. A breach of an implied obligation can give an employee a claim against its employer, which can be costly, time-consuming and detrimental to a businesses' reputation.
  • Employees have the right not to be unfairly dismissed, so employers have to be very careful to ensure that all proper procedures are followed before dismissing an employee. This can make it difficult to dismiss an employee and opens the employer up to the risk of legal action being brought against it.
  • Employers are vicariously liable for acts done by employees in the course of employment; this puts employers at risk of claims being brought against them.
  • Employees have a much wider variety of rights which an employer must ensure or face legal claims; these include ensuring that employees do not exceed certain working hours and allowing employees paid annual leave.

Benefits of Hiring Independent Contractors

  • Independent Contractors are responsible for providing their own equipment such as transport and uniforms, therefore lessening the financial burden on the employer who isn't responsible for bearing these costs.
  • Unless the independent contractor has been hired for a fixed term, they can usually be let go of relatively easily and are not legible to claim unfair dismissal.
  • Employers can request their services as and when needed and so they are better able to manage their workforce in line with the needs of the business. Therefore, hiring an independent contractor may be a preferable option if your business is one which is prone to experiencing peaks and troughs.
  • Independent Contractors possess very limited employment rights and protection, which limits the risks of them bringing a claim against their employer.

Both types of workers possess benefits and disadvantages, therefore when deciding on the composition of your workforce, the core needs of your business need to be assessed in order to understand which type of worker would best serve these needs.

For more information on this topic, please contact Gurpreet Sanghera on 0345 070 6000, or you can drop him an email on Gurpreet.Sanghera@emwllp.com

This blog was written by both Bruna Oliveira and Gurpreet Sanghera of EMW Law.

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