The cheaper option on paper isn't always the right one. Run through these questions before you decide.
1. How long is the work?
Short projects and uncertain workloads favor contractors, because you pay only for time used. Steady, long-term work usually favors an employee, who costs less per hour over a full year.
2. How many hours do you need?
Employee
$80,000 × (1 + 10% + 20%) + $6,000equals$110,000
Contractor
$55.00 × 1,800 hequals$99,000
Break-even rate
$110,000 ÷ 1,800 hequals$61.11
Difference
|$99,000 − $110,000|equals$11,000
Below the break-even rate, a contractor is cheaper even for a full year. Above it, the employee wins on cost for full-time work.
3. How much direction will you give?
If you'll set hours, methods and daily tasks, the relationship looks like employment. Many countries' rules classify workers by how they are managed, not by what the contract says.
4. Is the skill specialized or short-lived?
Rare skills needed for a few months are often cheaper to rent than to hire.
5. What does knowledge retention need?
Work that builds long-term knowledge of your product or customers is harder to hand back and forth between contractors.
Tip: If you keep a contractor full-time for years, check classification rules where they work. Misclassification can bring back taxes and penalties.