Once you decide to hire remote talent as a business, it may feel like all your talent problems are resolved. 

Why? Because it’s easy to think there’s an abundance of talent

While it’s true that talent is everywhere, deciding to hire remotely is only the beginning of the journey.

Another important hurdle you need to tackle is how to classify your remote talent.

Do you hire them as employees? If so, what are the benefits to you? What works? And what doesn’t?

Is it better to hire them as contractors rather? What are the advantages to this approach and what are the challenges?

In this blog post, we’ll take you through the ins and outs of classifying remote talent as either employees or contractors. What you need to know, the advantages, challenges, and strategies to make the right decision.

Remote Contractor vs Employee: Factors to consider

Before you even decide between an employee or a contractor, there are fundamental principles you should use as a guide to making your final decision.

Here are factors to consider when choosing between contractors and employees as a remote team

Degree of flexibility

Flexibility is one of the most important elements that differentiates a contractor from an employee.

Contractors typically work on short, specific projects. And if you’re a business looking for people to work on specific projects, then contractors are your best bet. Among the features that define the flexibility of a contractor include:

  • They often have the freedom to work on multiple projects or employers at the same time
  • You’re able to, as a business, scale up or down depending on your budget and project needs, which can help save cost and time
  • That also gives you the business the opportunity and flexibility to hire a diverse talent without having to commit to a long-term agreement

Employees are however different. Just like their roles in in-office teams, they tend to bring the following features:

  • They offer stability to your team through a long-term commitment 
  • Since they’re staying for long-term, they usually get introduced to the company culture, which can help grow the team
  • They are good for projects and roles that require long-term dedication and collaboration.

Cost, budget, and charges

Whichever option you decide to go for, be it a remote employee or contractor, comes with its own cost and budget structure. 

For contractors, they can charge either based on the hours worked or based on a project fee. In most cases, you could get a better deal hiring a contractor as compared to an employee. Contractors, in most cases, handle their own health insurance or retirement benefits, so it doesn’t fall on you as an employer.

For employees, payment can also be made hourly or based on an agreed monthly or weekly wage. However, you need to understand that, as an employer, you would handle taxes, retirement benefits, and sometimes the equipment they need to work with.

Navigating legal obligations: employee vs contractor

There’s a significant legal difference between contractors and employees. Here’s an outlook of the legal obligations when it comes to a contractor:

  • Contractors usually handle their own taxes and insurance, so you may have fewer legal obligations as an employer.
  • They are considered independent entities or consultants, so they have a legal structure of their own set up.
  • As an employer, what you need to do is to ensure that whichever legal obligations employers take, are outlined in a contractual agreement.

This is significantly different when hiring an employee. Here’s what legal obligation entails when hiring a remote employee:

  • When hiring remote employees, you need to adhere to legal obligations in their jurisdiction
  • Depending on their location, you’ll have to comply with minimum wage, benefits, a safe working environment, and more.
  • You have to understand that these add up to you administrative cost as an employer

Degree of control over work

Who controls work: what’s done, when it’s done, and availability? 

Well, this would depend on whether you’re hiring a remote contractor or employee

With contractors, you would typically have less control as an employer. Contractors, after being assigned, may bring their own tools and processes – which goes a long way to determine completion and how task is delivered. 

However, employees are typically under your supervision. As a result, they follow your preferred tools and processes. With this, you’re able to build alignment with your overall goals as a company and also achieve your objectives based on certain standards.

Advantages of Hiring Remote Contractors

What are the benefits to hiring remote contractors as an employer? Let’s take a look at what you’ll enjoy:

1. Saving cost and controlling your budget:

With remote contractors, you can save huge amounts on certain things like administrative expenses and benefits. And you also have more control on budgets based on the projects you’re running.

2. You get to work with specialized expertise and skillset:

There are lots of contractors with great experience and specialized skills. Hiring them brings lots of benefits to your team to augment when you may not have internally.

3. Less time spent on administrative responsibilities:

When working with remote contractors, you are saved from handling administrative stuff such as hr, taxes, and payroll. 

Cons of hiring a remote contractor

  • As an employer, you typically do not have more control over work deliverables
  • Contractors may not have the time for long-term commitment, which could affect company culture
  • You could encounter legal risks, such as misclassification, especially when the contractor doesn’t handle these with much care

The benefits of hiring remote employees

What if you decide to go for an employee, what are the advantages as an employer? Let’s take a deep dive.

1. Team integration plus long-term commitment

Once you hire remote employees, there’s that assurance of long-term commitment to your company’s goals. And they also become part of your team, which smoothens the work environment and aligns tasks.

2. Employee development to the benefit of the firm

Remote employees usually feel more connected to your team, which encourages you to invest in them. This in turn leads to loyalty and lower turnover rates.

3. You comply with employment laws and stay out of trouble

While you may have an added responsibility of handling taxes, payroll, and other regulatory tasks when you hire an employee, it could save you in the long-run. Since you’re handling these things, you take all the necessary precautions to stay compliant with local laws. This safes you from legal issues that may arise out of misclassification, non-adherent to benefit policies, and more.

Cons of Hiring an Employee

  • You may incur lots of expenses since you’ll be handling insurance, benefits, and taxes 
  • More administrative tasks and expenses with payroll, compliance, and more
  • A more nuanced and complex hiring process, that could delay team integration

Conclusion: How do you make the right choice when hiring remotely? Employee vs Contractor

The choice you make would depend on the factors we’ve outlined above. However, there’s no ones-size-fits-all solution here. 

Here’s what we recommend at Arbonum

Have flexible work arrangement: hybrid if possible

What if you could go with both employees and contractors? Bring in an employee whenever you need to and a contractor too when you require their services. So you can practice a hybrid or flexible model that gives you the benefits of both worlds. Why settle with one when you can tap into the benefits that come with both.

Continuously evaluate your choices and adapt

You don’t have to stay stagnant as an employer when it comes to hiring. Whether you go with employee over a contractor or choose both, you need to continuously evaluate your decisions. Know which one is working, which option needs improvement, and how can you turn this around to benefit your firm.

The remote work landscape is ever-evolving, my friend. Stay ahead of the curve by continuously evaluating and adapting your hiring strategies. Flexibility and adaptability are your trusty companions in this dynamic journey.

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