As the recession forces small businesses across the country to cut expenses, some are making a dramatic shift — they’re laying off employees and using independent contractors instead.
Back in 2006, Ron Gold had only full-time employees in his advertising agency, but business began to slip and he began using freelancers.
Last year, he closed the agency and started a marketing services firm, using only independent contractors — some of whom used to be former staffers.
There are many benefits to hiring contractors rather than employees, and not just during a recession. Businesses don’t have to pay for benefits and don’t owe the government payroll taxes for contractors. When there’s less work to be done, the contractor isn’t paid, unlike the employee who draws a regular salary.
Independent contractors must by law be treated differently from employees. An owner doesn’t have what the IRS calls the right of control over contractors — for example, the place where they work, the hours they put in on a project, the tools they use and how much supervision there is.
Photo by tatlici.