Temps, VAs, Contractors and Employees: Who Should You Hire?

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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The options for bringing in some help for your business go far beyond hiring a full-time employee. While an employee can be a good choice in many situations, it's worth taking a look at the other options out there, as well as the situations in which each can best help you grow your business in the long term.

Temps

Depending on the type of projects you need help completing, a temp may be more practical than bringing in a new employee full-time. On an hourly basis, it may appear that a temp is more expensive than hiring someone directly, but the hourly rate you pay for a temp is typically not that far off from the actual cost of an employee when you calculate taxes, insurance and so on. You also have the benefit of only paying for a worker when you have a project for him or her to work on. Another benefit of hiring through a temp agency is that the agency handles most of the paperwork and other details that go along with hiring an employee. As a general rule, agencies test applicants' skills, check references, handle payroll taxes and more.

Whether or not a temp is a good fit for your business tends to be a question of just how much work you have that you or the other employees already in place can't handle. For the occasional project where you just need a spare pair of hands (like changing over a filing system or conducting inventory) a temp can significantly speed up the process at a reasonable rate. But if you've reached the point where you need at least a few hours every week, it's likely that a temp isn't the best choice for you. After all, there's no guarantee you'll get the same temp every time, which can mean training a new person on a regular basis.

Virtual Assistants

Sometimes you don't need a full-time employee, but you do need to work consistently with the same person. A virtual assistant can often fill that gap. While you may never meet a VA in person, he or she will provide you a certain number of hours of work a week, doing everything from administrative tasks to web design, depending on the VA in question. Typically, virtual assistants are contractors, running their own businesses, although some will work for a larger business providing a range of assistant services. Different VAs will offer different skill sets.

The price tag that goes along with working with virtual assistants can vary pretty dramatically. Many virtual assistants are based outside of the country and can offer significantly lower rates due to their location. However, there are trade-offs, including difficulties communicating and working with someone in a very different time zone. VAs closer to home tend to be more expensive, especially if they offer a specialized skill set. However, it is worth noting that the costs associated with an employee are absent when you work with a virtual assistant. You don't even have to pay to have the lights on when your VA is working.

Contractors

For particularly specialized projects, it may make sense to bring in a contractor or a freelancer. If, for instance, you need a new website built for your company, a freelance designer is likely to be the most cost effective option: you aren't likely to need more than one website any time soon, so hiring a web designer on a long-term basis just doesn't make sense. A contractor is likely to have better-developed web design skills, as well, than an employee for whom web design is just one more responsibility. Contractors are generally one of the best options when you need a specialized skill set on a short-term basis.

Pricing for contractors is fairly similar to that of virtual assistants. You'll likely pay a premium for the best work and for someone located within the country, but a freelancer does not work from your office nor require you to pay benefits or taxes. Many contractors are also willing to work on a per-project rate. However, it is important to be careful to make sure that your professional relationship is based on a contract and to check out the IRS rules for working with contractors. There are certain circumstances in which the IRS will reclassify a contractor as an employee, which can be a big mess for both you and the contractor.

Employees

The first type of help most employers think about bringing in when they're ready to expand are employees. Typically, employees are expected to work for a company indefinitely, meaning that an employer is making a long-term financial commitment to any employee. There are other financial considerations that can set an employee apart from the other personnel that might help you with your business: when you have employees you have legal obligations such as payroll taxes. You may also choose to offer employees benefits, while it's very rare that benefits are available to other people who may be working for your business.

If you know you're going to consistently need the same skill set in your business for a long time to come, an employee is probably going to be the best option, whether part-time or full-time. It may also be worth considering an employee if you need someone to work specific hours and in a specific location. Those are both concerns that can lead to contractors being reclassified as employees.

Choosing Your Help

It's crucial to look at the specific responsibilities you have in mind for anyone you're considering bringing into your business. Are those responsibilities flexible in any way? If there's a lot of variety, would they be better broken up into smaller projects? How important is it that you have the same person handling these responsibilities day in and day out? These questions can be key to deciding whether you really need an employee or whether hiring someone as a contractor, a virtual assistant or a temp may prove to be a more cost effective option.