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Should you hire employees or independent contractors?

As a new business owner in Minnesota, the idea of hiring employees when you are in the early stages may seem like a good way to raise costs. However, you need the help of others to get all the work done. Could hiring independent contractors be the answer?

A false step in this process could lead to serious penalties, so it is crucial to consider the difference between an independent contractor and an employee. The Society for Human Resource Management explains some of the distinctions.


If you want to hire someone and provide a schedule and detailed instructions of how you want him or her to perform the job, you probably want to hire an employee. Independent contractors are self-employed, so even though you give them work to do, they decide how to get it done. You are paying for the finished product, not the person's time.


You may want someone to work for you who will not be "moonlighting," or taking side jobs when he or she is not at your business. Because independent contractors may perform the same type of work for many companies at the same time, you may want an employee if exclusivity is a factor.


Perhaps you have a highly specialized job you want done. For example, maybe you want someone to upgrade your computer system and keep your software up to date. This is not your area of expertise, so you would not be able to provide training. An independent contractor already has that specific knowledge, so he or she would be ready to step in and do the job right away.

In many cases, the lines are blurred between the two types of workers, and even if you believe you have followed the letter of the law, there could be exceptions or other factors that get you in trouble. Because every case is unique, this general information should not be interpreted as legal advice.

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