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Employees Vs. Contractors

Who are the best players for your team?
May 1, 2001
URL: http://www.entrepreneur.com/article/40224

As a former consultant herself, Chris Perkett had a fairly easy time deciding whether to hire independent contractors when she started her Marshfield, Massachusetts, virtual PR agency in 1998. "I wasn't ready to hire employees because there's so much involved with doing that," says the CEO of PerkettPR Inc. "I wanted to make sure I was [building the company] right and wasn't biting off more than I could chew."

Perkett suggests checking out Guru.com, a Web site dedicated to all things contracting.

Johnson urges entrepreneurs to get an attorney and really understand the IRS' definition of what a consultant is. Visit the IRS' Web site for more details.

Perkett admits she initially appreciated the temporal nature as well as the flexibility of having independent contractors, but as she began to increase her client base, those very aspects began to concern her. "I needed more of a commitment from my staff," she explains. "The knowledge that they could leave at any time was always looming over my head. I needed to show my client base I had a staff that was as committed to serving them as I was."

So at the end of last year, Perkett decided to switch to an employee-based staff, hiring many of her former consultants as full-time employees. Since then, Perkett says there's been an increase in the level of excitement in the company's projects, and her clients now feel the company is growing and stabilizing, two things that weren't happening with the contractors.

Still, employees aren't necessarily the only way to achieve a common vision and commitment for a business, according to Jennifer Johnson, principal of Johnson & Co., The Virtual Agency. With 15 contractors and only two employees on board, Johnson encourages dedication to her Salt Lake City public relations firm by requiring all contractors to attend regular business meetings and retreats and to meet with a senior consultant mentor. "I think it's a myth to believe that because someone is an employee, it means they're more dependable," says Johnson. "In today's fast-moving, competitive market, the best talent needs to stay motivated and driven whether they're a consultant or an employee."

According to Johnson, the ever-changing nature of today's business world has left traditional job descriptions by the wayside and forced companies to have a more flexible structure. "Consultants are used to change; they thrive on [that]," she says. "They understand they're getting paid to deliver tangible results as opposed to just punching a clock."

As for Perkett, although she's had to adjust to the variety of personalities that now exist in the core of her company, she's confident that hiring employees was the right choice for her growing business. "If you're not sure where or how you want to grow, then it's a lot to take on," she says. "But I think it helps our clients feel like we're growing, we're adding clients, and we're committed to this business."