Sub-Contractors vs Employees – The Financial Pros and Cons

If you’re a business owner, aiming for business expansion and growth can be potentially problematic without the right answers to some important questions.

 

Who should you bring into your business to help you do more?

 

Whether you’re a tradie looking for extra hands-on help on the tools, a creative looking for others with complementary skills, or a financial services professional in need of admin support, the choice between hiring a permanent staff member or using the occasional support of a sub-contractor can be confusing.

 

One thing is clear – the only way to offer more services in your business, or deliver the core services you do offer to your existing clients in a more streamlined and efficient manner, is to have other people you can rely on. To make the right team-building decision for your business, it’s important to understand the potential benefits – and the potential problems.

 

 

Pros and Cons of Subcontractors

Pros:

  • Fixed priced for work
  • Subcontractor is responsible for Insurance obligations
  • Work is done by experienced people with proven reputation
  • Improves cash flow, with credit terms
  • Business becomes scaleable, with ability to deal with multiple projects at one time

 

Cons:

  • Contractor may take shortcuts to complete assigned tasks
  • Contractor could steal current or future work
  • Additional administration and insurance obligation costs
  • Increased admin costs to monitor and keep insurance details
  • The lack of loyalty means subcontractors might take a better offer and leave you in the lurch

 

Pros of Employees

  • Thorough employment screening selection process
  • Stringent quality control
  • Many clients perceive businesses with internal staff are more professional
  • More cost-effective in the long-run
  • Training for employees is better for long-term business growth

 

Cons of Employees

  • Hiring staff may also require hiring a supervisor/manager
  • Increased costs, such as sick leave, annual leave, superannuation
  • Increased insurance expenses
  • HR issues, such as conflict management

Quality is King

No matter what choice you make, remember: Quality control is the lifeblood of your business reputation. Without it, inviting a slap-dash style of sub-contractor or employee to look after the needs of your clients could result in shoddy workmanship that reflects negatively on the attention to detail your business offers.

And if your customers have a less-than-happy experience? They might not call back to give your business a second chance – and they almost certainly share any positive word-of-mouth that would bring more new clients to your business.

 

To explore the best expansion option for your business, talk to our small business specialists at Tailored Accounting Solutions.

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