Reasons to hire a contractor

Flexible work force

Using contractors allows for flexibility in expanding and shrinking your work force. Hiring a contractor for a specific time period or project makes it easier to accommodate fluctuating work force needs. This can be a real advantage for companies with fluctuating or periodic bursts of activity.

Contractors are most often hired to cover needs that fall outside the production of ordinary goods or services. A contractor with specialized expertise can usually get started quickly and with a minimum of instruction, leaving you with more time to run your business.

Lower Cost

By using a contractor, you avoid the financial and administrative costs associated with having an employee, including payroll taxes, worker's compensation insurance, and benefits. Contractors usually provide their own equipment and work space. Because contractors must cover these costs themselves, their hourly rates are typically higher than what you would pay for an employee. But overall, the total cost of hiring a contractor tends to be lower.

Easier administration

You are always responsible for treating workers fairly, but fewer government regulations apply to contractors. Companies with very few employees are exempt from certain employment laws altogether. If you use independent contractors in appropriate circumstances, you may be able to keep your employee headcount low enough to qualify. Check with your accountant to find out which employment laws apply to you.

Using contractors also reduces risk of wrongful termination and discrimination lawsuits. Because your commitment extends only for the length of the contract, you can easily terminate a contractor by either letting the contract expire or ending the relationship according to the terms of the contract.

Although you don't have to pay taxes for contractors, the government requires to you report how much you pay them if it's over a certain amount. When setting up the contractor as a vendor, select the "Vendor eligible for 1099" box on the Additional Info tab. QuickBooks will then generate the 1099-MISC form which must be filed with the IRS and sent to the contractor at the end of the year.