Introduction to Contractors
A building contractor obtains construction contracts and delivers contractually required work. Contractors have construction experience, often in a trade – electrician, plumber, etc. On most projects, though, they delegate work.
The contractee owns the property worked on. The contractor undertakes the contracted job. In contract costing, the contractor completes contracts at the work site. The contract amount is the total payment to the contractor.
Benefits and Considerations of Hiring Contractors
Tech companies can save $100,000 per year by hiring a contractor instead of an employee. Hiring contractors can be faster but may be less engaged and harder to retain than employees.
Many types of contractors are hired for specific, irregular jobs instead of as regular employees. A contractor is responsible for planning, coordination, discipline, finances, documentation, and risk calculation for a project. Things contractors do include directly communicating with clients.
Hiring and Classifying Contractors
In construction, an owner hires a general contractor who hires subcontractors – plumbing, painting, etc. In marketing, an agency hired for a brand refresh hires website, photo, newsletter subcontractors. Subcontractors are hired by contractors.
To find a contractor, ask friends and neighbors who have experienced the contractor’s work firsthand. They want to avoid your complaints so will give good advice. Unlike strangers, friends and neighbors are trustworthy.
Independent contractors are self-employed, providing services per a contract. Unlike employees, contractors don’t get benefits, unemployment/workers’ compensation insurance, or wage tax withholding. Independent contractors have expertise – HVAC, roofing, etc. They usually work for multiple clients simultaneously. Contractors have wider skills than employees and can quickly start work.
Differentiating Contractors and Employees
A contractor sells services at a pre-agreed rate. Contractors can deliver physical work or digital assets. Sorting out whether someone is an employee or contractor is tricky but key.
An employee works regularly for a business, usually with set hours and salary. Employers may still have to withhold tax for contractors. Contractors provide skills or services to companies for a fixed period – hours, timeframe or project duration.
Employer Considerations
Businesses often prefer classifying workers as contractors so they don’t pay taxes, provide benefits or follow labor laws. However, laws restrict those choices even if both parties agree. If you misclassify an employee as a contractor, the IRS will penalize you.
The day-to-day work relationship defines whether somebody is a contractor or employee. A contractor provides services to another organization for fixed compensation. A contractor works for several clients while an employee works solely for one employer. Employers provide employees with resources to perform tasks.
Hiring contractors saves employers 30-40 percent on labor costs. Businesses have less paperwork and responsibility with contractors. Companies don’t do payroll or withhold taxes for contractors. It’s assumed contractors already have the required skills and training.