As your business grows, you will start to hire help to keep up with growth opportunities. In addition, you might want to expand your team to fill the gaps with the skills and expertise you need to take your business to the next level.

There are many factors to consider when hiring a new employee. But what if you don’t have the time or resources to do so? You may want to consider hiring a contractor.

Whether you hire an employee or a contractor depends on your business’s needs. However, hiring help can be expensive and a big decision for a small business.

There are pros and cons to hiring an employee and a contractor. Therefore, it is essential to not only evaluate their costs in the short term but consider the cost of hiring one versus the other for your long-term needs.

It can be challenging to decide whether a contractor or an employee is best for your business. So let’s examine some of the advantages and disadvantages of each type of support.

Hiring an employee for your business

Hiring an employee can be an involved process, including several rounds of interviews, background checks, and negotiating compensation. In addition, you’ll be responsible for paying them for benefits, training, and a salary or wage when they start.

Pros of employees

Company Loyalty

Employees might be more committed to the business since it is their source of income, and they want to keep their job. Company loyalty may translate into a better quality of work as their goals may be more aligned with the business’s goals.

Can be trained for business needs

You can train employees to do the tasks that your business needs. Employees typically will grow with the business as its needs change. You might promote employees or teach or train them as required. Good employees can help you grow your business.

Cons of employees

Training and onboarding can be expensive.

The company has to invest in employee training, which can be costly. In addition, the company is also responsible for paying for employee benefits, such as health insurance, sick days, and vacation time.

Risk of hiring bad employees

There is always a risk that the employee will not work out and may even harm the business. It can be more challenging and expensive to let go of employees than contractors.

Payroll, benefits and other administrative tasks

When you hire an employee, you must withhold CPP/EI and income taxes from their paycheque to send to the CRA. Additional administrative tasks can burden your accounting function if you don’t have the right expertise in-house to process them as a small business.

You might also have to establish company benefits such as health insurance to provide competitive advantages to employees. However, establishing these processes can be costly and time-consuming if you start your business.

Hiring an Independent contractor

An independent contractor usually provides a service to your business under terms specified in a contract. Typically, you would hire a contractor to do specific tasks or projects. Depending on their contract, they might be working with you for several weeks or months at a time, or they might have several clients, including your business, at the same time.

Pros of hiring a contractor


You can hire an independent contractor for a short-term project or task. Since their contract is for a limited time, you can let them go when they have completed the project. Short-term contracts can be beneficial if your business needs fluctuate, such as for seasonal businesses, or you don’t have the resources to commit to a long-term employee.


When you hire an independent contractor, you will not have to provide tools and training – which can be a significant expense when hiring employees. The expectation is that a contractor is ready to hit the ground running. Contractors are usually responsible for having their own tools. In addition, contractors are responsible for their taxes and benefits. You will also not have to pay vacation time or sick days.

Cons of hiring a contractor

The right contractor may not be available when you need them.

Contractors can work with several clients at the same time. As a result, they may not be as committed to the business since it is not their primary source of income. Or contractors may have better opportunities from other companies, and it may be more expensive to hire them for subsequent projects when you need them.

Contractors can be more expensive in the short term.

Since employees do not receive the same benefits, they may charge more for their services. In addition, if you have to hire multiple contractors for different projects, it can be more expensive than having employees who can do various tasks.

Which is better for your business – a contractor or an employee?

Hiring an employee versus a contractor depends on your specific needs. For example, a contractor might be better if you need someone for a short-term project or task. But if you need someone more committed to the business and training them to do specific tasks, then an employee may be the better choice.

If you are a small business owner, you may choose to hire contractors over employees, as it can often seem more straightforward and less expensive. However, it is vital to consider the CRA’s stance on classifying an employee versus an independent contractor. If you have questions about your hiring and payroll obligations, your accountant can provide the advice you need.

Contact Ford Keast LLP in London for All of Your Payroll and Accounting Needs

Our team of skilled accounting professionals can help advise you on the growing needs of your business. At Ford Keast LLP, our financial business advisors can provide services to support your accounting and payroll function, whether you need partial or complete support. To learn more about how Ford Keast LLP can provide you with the best accounting expertise, contact us online or by telephone at (519) 679-9330.

Office Location

624 Maitland Street
London, Ontario N6B 2Z9
View Office Hours
T (519) 679-9330
F (519) 679-3204