Many IT businesses choose to hire independent contractors and subcontractors rather than employees because it means less hassle and no responsibility to pay employment taxes and benefits like Workers' Compensation Insurance. But as their business grows, many IT business owners begin to wonder when they should hire their first employees.
Let's look at five reasons you may want to hire employees and what your Workers' Comp requirements may be.
5 Reasons IT Businesses Should Think about Hiring Employees
Hiring employees represents a significant investment – you'll pay for Workers' Comp coverage, unemployment taxes, and other benefits. But like other investments, it can pay off. Here are five reasons it might make sense for your business to make the switch and hire your first employees:
- The work you need done requires significant training. With employees, you can train them and supervise their work – two things you can't technically do with contractors. Contractors usually just deliver work to you, which means you don't know how the work was done. By contrast, you can make sure employees do the job exactly as you want it to be done.
- Your contractors are busy or difficult to contact. A Huffington Post article provides a nice portrait of the typical contractor's life. They're running around, working multiple part-time gigs, and they could be exceptionally busy, or not all, depending on how their schedule shakes out. For you, that means that a tech contractor may be completely dedicated to your project or have their mind on other work.
- Your work is sensitive and requires strict security. You hire a contractor, but you don't really know the parameters of their security. When you hire an employee, you can ensure they're working behind your firewall, using your VPN, and following security best practices.
- You see opportunities for growth. While IT contractors are invested in your business, their responsibilities are only to the project. In a sense, they live from project to project. But good employees should be looking to grow with their employer to develop their skills, help attract new clients, and contribute to the company in other ways.
- An improving economy means tougher competition. It stands to reason that as the economy gets better and there are more job openings, more of the top quality tech contractors will simply be hired for full-time work. To be competitive, you may need to hire full-time workers or pay a premium to attract top talent.
Meeting Workers' Compensation Requirements at Your IT Business
Each state sets its own Workers' Comp laws. Depending on where your business operates, you may have different legal requirements (see a state-by-state guide to Workers' Comp laws on our sister site insureon). Here's an overview of relevant Workers' Comp facts:
- Most employers are required to have Workman's Comp for their employees.
- Benefits typically cover medical expenses when employees are injured at work.
- If an employee is injured and has to miss work, Workers' Comp can provide coverage for lost wages.
- Costs will vary, but you can check out sample Workers' Comp quotes to get a rough estimate. A small tech firm usually pays $2,441 in annual premiums for $1 million in coverage.
When you're ready to hire employees, remember that you may be legally required to have Workers' Compensation Insurance. This coverage not only helps you fulfill your legal obligations, but it also helps you handle costly and unpredictable accidents. If you have any questions about Workers' Comp, talk with a TechInsurance agent.
