As small business owners manage the complexities of either starting or acquiring a small business and steering it toward success, one of the most critical aspects to consider is the approach to human resources.
Even the issue of human resources itself is vast, with several important decisions to be made regarding the recruitment, management, compensation and retention of employees, among others.
How about your approach to staffing? How much work needs to be done to create the business units you can sell? How much expertise do you need and what kind? And at what pay level?
exempt and non-exempt employees.
work schedules less predictable.
What Are the Trends?
The Labor Department has been collecting this since 1968, a time when only 13.5% of US employees were part-timers. Over 55 years later, the total number of part-time workers has reached 17% and is growing, with some sources reporting a more than 20% contractor workforce.
The trend of hiring contract workers is expected to grow significantly still in the coming years. MBO Partners research shows that almost 8 out of 10 corporations (77%) expect their use of contract workers to increase substantially (33%) or increase somewhat (44%).
There are a few reasons for this growth in a part-timer or contractor workforce:
- Agility. Contract workers are particularly useful for shorter term projects, like testing a new software or overhauling a website. They allow core full-time employees to tend to key tasks while delegating one-off projects to contractors. Also important to agility is that contract workers often provide a very narrow, often specialized set of skills that can be difficult to find elsewhere.
- Scalability. In the current economic environment, companies are struggling to grow, despite sustained high demand. The problem is labor availability. To help them deliver on demand and grow their business, leaders are expanding their talent search well beyond their usual geographic area.
- Cost. Having a contingent workforce has a very appealing cost advantage for companies — particularly at a time when organizations are trying to do more (or the same) with less. On one hand, employers don't have to manage employment taxes, health insurance coverage, retirement benefits and many other such expenses as they would for their full-time workers. On the other, organizations can pay contractors for the exact number of hours worked to accomplish a specific goal, and free core employees from tasks that eat away at their productivity.
Challenges of Managing W-2 Employees:
- Higher costs due to salaries, benefits, and perks.
- Administrative overhead of managing schedules, training, and payroll.
- Time Commitment. There is often a skill gap between W-2 employees and their 1099 counterparts that results in additional training of W-2 employees. Employers usually need to spend much more time training W-2 employees than just hiring a 1099 contractor.
Drawbacks of Using 1099 Contractors:
- Less Stability. This can be a serious disadvantage for employers who like to have much control over their employees. Contractors typically work whenever they want and require very little supervision. This can mean that it's hard for employers to tell them how they want the project completed.
- Weaker Relationship. This can be hard on employers who want to build stronger bonds and greater worker morale with contractors and tough on contractors.
Assess the costs: long-term investment in full-time W-2 workers versus short-term cost savings with 1099 contractors.
This is an important decision with long-term financial ramifications that will impact the health of your company and potentially the financial well-being of you and your family. Because of this, it’s always a good idea to spend ample time with a business consultant, lawyer and accountant. There are also helpful resources online on this important subject.
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