Hiring a new employee can be an exciting time for your company: there’s a new team member who is bringing fresh ideas, skills and experiences. There’s also a risk: will this hire fit into your company culture and mesh well with existing team members? Even with an extensive vetting process, there’s always the chance that your new hire won’t work out. Not only is a bad hire demoralizing, but it’s also expensive, costing businesses as much as 213% of that employee’s annual salary to replace.
In today’s climate as we head towards recession, your company may not be in a position to take on the costs associated with a new hire. What if there were a way to minimize the long term costs while maximizing the benefits of much-needed talent? That’s exactly what hiring a contract professional does. When you hire a contractor, your business can access the same benefits of experience and skill as a permanent hire with fewer financial risks.
Minimize Risk Exposure
I have a background in investing and am always keeping an eye on stocks. That’s a great way to consider the benefits of contract professionals. It’s as if you’re placing your money in a high-yield bond. You’re able to save on those initial upfront costs by piecing out that spend over several months. As any savvy CFO knows, spreading out an investment over time is often the more efficient way to do business.
Less Upfront Spending
Companies spend an average of $4,129 to onboard a new full-time hire, on top of what they’ve already spent on the talent acquisition, interview screening and background checks. There are the administrative time and paperwork costs associated with a new hire, training expenses and potential travel to a company’s corporate HQ, and provisioning tools, such as a new computer, software licenses and office supplies. There’s also opportunity cost associated with the time supervisors and fellow team members spend training new employees.
Contract employees also provide significantly fewer tax burdens on businesses. With contractors, companies do not need to withhold income taxes or FICA (Social Security and Medicare) taxes. Additionally, no other employment taxes need to be paid. It’s important that you classify employees and contractors appropriately. Misclassifying an employee as a contractor can lead to tax penalties and fines, so make sure both parties know where the lines are drawn. At Lucas Group, we handle payroll for contract professionals, further minimizing paperwork and streamlining your accounting process.
A New Way to Think About Benefits
Remember that statistic about the average new full-time hire costing more than $4,000? That doesn’t even factor in a permanent worker’s salary or benefits. Per ADP, benefits account for 29.9 percent of total costs for an employee. That’s almost a third of every single full-time contract going toward a 401(k), medical insurance, home office supplies, and other potential benefits.
But what if you could avoid those added expenses while still making your contract employees feel valued? At Lucas Group, in addition to managing contractor payroll, we also provide contractors with a benefits package, including medical, dental and vision coverage. Contractors enjoy important benefits, and your company will save by not having to handle this benefits process internally.
A High Value Resource to Move Your Company Forward
Many contract employees are individuals with years of experience in a particular field or niche. There are many reasons they may be looking for contract work, be it due to personal preferences, wanting to evaluate new companies and cultures, or a love of taking on a project and then moving on to something new. There are tons of reasons why highly skilled workers are choosing to go the ‘gig’ route these days, and this impressive talent can come help push your company forward.
There are certain situations where a full-time employee is right for your company. But the benefits of contractors are plentiful. Be sure to consider your options carefully before making a final decision.