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Making Independent Contractor or Statutory Employee Choices

Simple Alliance, Kenya Limited


Key Considerations

Depending on your business’ cycle among other factors, you may hire a permanent employee or an Independent Contractors (IC) to carry out various tasks. Whether you engage ICs or permanent workers, your key considerations include:

  • The cost savings you associated with your decision
  • The type of worker who is best suited to the tasks at hand  

The Independent Contractor

Your scrutiny may dictate that you hire a contractor worker to execute certain specified tasks. You need to note that the IC is not necessarily unqualified. Rather, the IC is usually an individual who prefers to put in fewer hours into your business. Indeed, the IC could be as qualified as the permanent employee. When hiring the IC, you need to take into consideration several factors. Such analysis will ensure that you achieve your objectives.   

Factors for Analysis

For smooth business operations, you are required to examine a number of issues when contemplating hiring an IC. The major analysis points you need to go through include:

  • The costs you will incur while orientating the IC
  • Whether the IC has the necessary skills to satisfy your requirements
  • Whether you need to guide the IC and the necessary skills for offering direction
  • The IC’s total pay check sum 

Managing Employee Expenses

It makes perfect business sense to try to have adequate control of your staffing costs. After all, so long as quality is not compromised, the lowest possible worker expense figure is desirable. To achieve this end, you need to institute measures that help you to effectively manage employee costs. Major actions you need to take include: 

  • Basing wages on employee value
  • Tracking productivity and sales
  • Considering associated legal protocol   
  • Carrying out periodic employee productivity audits
  • Considering the orientation costs and time
  • Allowing for the incorporation of part-time workers into your staff pool

Base Salaries on Worker Value

Avoid abiding by a standard employee enumeration scheme. Rather, when setting salary figures, put into consideration individual workers’ value and productivity.

Consider the Orientation Time and Costs

An IC usually directly goes into the work you assign them. On the contrary, a permanent employee could require some on job training. This exercise consumes business time and funds. Considering these parameters will aptly guide your choice - whether you hire an employee or an IC.   

Monitor Productivity and Sales

Carry out an hour-by-hour monitoring of productivity and sales. Conducted over some time, this exercise will give you an idea of when your business performance slows down. Such information will guide your staffing programme.    

Conduct Worker Productivity Reviews

You need to periodically assess the productivity levels of your employees. This exercise will identify highly productive workers. Promote and accord added responsibility to these workers. Plan to maintain such employees even as you lay off the less productive ones.

Incorporate Casual Workers into your Worker Pool  

Whenever you anticipate slow business, consider laying off casual employees. When business peaks, hire the temporary workers. This way, you reduce fixed expenses associated with employee remuneration during slow business periods.    

Considering Associated Legal Procedures

Hiring permanent employees could be taxing as it is usually accompanied by several bureaucracies. You may need to pay for the employees’ obligatory social security as well as health covers. Further you need to set time for official leave days. These requirements cost money. With the IC, you need not take these issues into consideration. If you do not want to go through the legal employee hiring protocol, opt for the IC.         

The choice of whether your small business would do well if it employed an independent contractor or employee is hinged on a variety of factors. Issues such as the cost incurred in orientating the employee to the tasks at hand as well as the employee benefit costs involved come into play. Further, you need to consider the bureaucracies involved in managing full time employees. Generally, there is no cut and paste solution to the issue of settling on a permanent employee or contractor worker. All you need to do is to carefully consider the intricacies involved in each case. Hiring statutory employees have brings certain bureaucratic challenges.  Such deliberation will enable you to arrive at a reasonable, informed option that makes business sense. 

Copyright (C) 2016, Simple Alliance Kenya Limited

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