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While the flashy pseudo-sharing economy start-ups like Uber, Lyft, Instacart, and TaskRabbit are known for popularizing the building of empires off the exploitation of contractors, the current trend is pushing away from the contractor-based employment model.
As many companies that utilize contractor based services have learned in the past, mischaracterizing employees as contractors can be a costly, multi-million dollar, mistake. Here are the top three advantages for businesses that choose to hire full time employees rather than rely on contractors.
Regular full-time employees are generally going to be more loyal than contractors. Even though nearly all employment is "at-will" employment, full-time employees generally receive health care benefits, and other benefits, in addition to a sense of job security. These items allow employees to be free from many of the common stressors that can result in poor judgment, which can occur while working for your business.
You can't control a contractor in the same way you can control a regular full-time employee. By definition, contractors are supposed to be independent, and should be allowed to exercise independent judgment on how to complete a project or task. The more control an employer attempts to exert control over a contractor, such as requiring specific methods for completion of a task, the less likely it is that the contractor designation would be deemed valid if challenged. Generally, employers are not supposed to be training contractors.
If your employees can have an impact on the quality of your products or services, hiring regular employees is preferable as you'll have more power to control and manage how they work.
While hiring full-time employees may be more costly upfront, it is known to lead to long term financial rewards. Happier workers are more profitable workers. A workforce that is incentivized to see the workplace succeed is more likely to be successful. Contractors are frequently left out of the success of the workplace by virtue of the fact that their success is not integral in the company's success.
Additionally, a misclassification lawsuit, or federal or state action, could result in severe penalties, fines, or worse.