10.5.2021

What is a Contractor?

Written by Kit Jenkin

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In the world of work, there are many different hats people can wear. One of the hats to wear is that of a contractor. 

There are currently over 5 million contractors in the US [1].

If you’re thinking about becoming a contractor, this blog tells you everything you’ll need to know.

Contractor definition

Before you become a contractor, you’ll need to know what you’re talking about. The term “contractor” can mean different things in different countries. For example, in Canada, “contractor” tends to refer to an independent building professional. 

However, in most English-speaking countries, the term “contractor” refers to an individual who operates as a sole proprietor or owns a limited liability company, who provides services to individuals or companies for a set period of time. This can be for a period of a few hours, several weeks, or last until the end of a particular project. 

Contractors work for themselves and source their own clients. Contractors are not required to work for one client at a time - they are able to service multiple contracts at once. 

How to become a contractor

It’s very easy to become a contractor. There are only a few things you need to do. 

Choose a field

This will be your field of expertise, where all your skills and abilities lie. Be sure to choose a field where you are already highly experienced. This experience will make you attractive to prospective clients. 

Choose a business structure

When you operate as a contractor, you need to create a business structure. Choosing a business structure will determine how you are paid and taxed. 

Contractors vs employees

Employees are permanently employed by your company, and therefore have access to certain resources and rights. They are required to carry out tasks set by their employer. An employee’s hours, wage, place of work, and compensation are set. Most employees are required to work for only one company if they work full time. The company is also required to manage the employee’s training, safety, and wellbeing. 

Contractors, on the other hand, have no set obligation to the company they work for. They are not obliged to complete work and can work for as many companies as they like. Contractors usually set their own hours and location of work. Contractors also don’t have as many rights as employees and do not have access to sick or paid leave. How much a contractor is paid is determined by the contract negotiations between the contractor and the employer. The contractor could be paid a different amount for a job in the future. 

Contractors vs subcontractors

Subcontractors undertake a contract from the contractor. Subcontractors undertake work that a contractor cannot do but for which the contractor is responsible.

Subcontractors can be anything from an individual self-employed person, such as a plumber carrying out work for a building contractor, to a large company. A subcontractor has a contract with the contractor for the services provided. They act in the same way to the contractor as the contractor does with their client.

Contractors vs freelancers

There is no legal distinction between a freelancer and a contractor. Both as self-employed professionals that hire out their services to a paying client. However, freelancers are more likely to work on lots of different projects at once. Contractors, on the other hand, tend to focus on only one job at a time, although there is nothing keeping them from working with multiple clients. 

Advantages of hiring contractors

There are a lot of advantages to hiring contractors. Here are a few of them:

Specialized skillset

Contractors usually operate with a specialized skillset. They are highly skilled professionals and are usually very good at what they do - often more so than your average employee. 

Objectivity

Contractors are not ensconced in the organization, and can therefore offer more objective assessments of situations and the company’s requirements. Sometimes, these outside viewpoints can be vital in helping companies improve. 

Less HR admin

The only admin you have to do for a contractor is their initial contract. They are not entitled to sick pay or paid leave. 

Good for urgent, temporary work

Contractors are used to working on big projects to tight deadlines. You’re more likely to get a successful turnaround on your project with a contractor [2].

Flexibility

If you think your chosen contractor doesn’t have the necessary skills to complete the task, it’s usually pretty easy to let them go and choose someone else. This is usually not possible with an employee. 

Fewer employer obligations

If your workload reduces and there are not enough tasks to keep your contractor, it’s very easy to terminate the contract. Rather than finding something for them to do, as you would for a normal employee, contractors can be let go at any time. 

Disadvantages of hiring contractors

While there are a lot of benefits to hiring contractors, there can be some downsides, too. 

Expense

Most contractors rely on irregular work to sustain them, so they need to offset the uncertainty of their roles by raising the price of their labor. The work you get a contractor to do will cost much more per hour than it would if you assigned it to an employee. 

Lack of loyalty

Contractors hold no obligation to their clients and are not required to work only for one company. They may also work for a competitor. 

Less control

Because contractors set their own hours, you have less control over how they work. They can also refuse to take on additional work if they feel their workload is too high. 

Uncertainty

A contractor can stop working for you whenever their contract is up. They are under no obligation to keep working for you if they don’t want to.  

Invest in the right tech

No matter what kind of worker you choose to employ, you need to invest in powerful technology to ensure your business runs as smoothly as possible. The best way to do this is with a state-of-the-art POS system

Epos Now offers both dedicated retail and restaurant POS systems that will help you take your business to the next level. 

Onboard and train staff in minutes​

  • Seamlessly add eCommerce, Click & Collect or delivery ​
  • Track margin data to identify your most profitable products​
  • Save hours of time with automated, real-time stock counts​
  • Integrate with your preferred payment partner
  • Synchronize your front & back of the house to increase sales and table turnover
  • Integrate with major food delivery apps to win more customers & drive revenue
  • Access your data 24/7 from any device, to make smarter business decisions
  • Drive repeat business and loyalty via CRM & promotions

Contact Epos Now to learn more about our systems.

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