How to Decide Whether to Hire a Contractor Versus Employee for Recruiting Business Development

QUESTION: I am looking to hire somebody for business development to pick up contract positions and grow the contract interim side of my business.  I am weighing the options and would be open to additional recommendations, meaning I want to hire somebody that is a contractor that focuses on business development only or hire a W2 employee that serves a dual role of business development and also recruit those positions that they bring in.  For a variety of reasons, the contracting route is more attractive for me, at least for starters.   -Tom, Denver, CO

ANSWER: I disagree, when you bring on a contractor, you hire a competitor.  Just remember that.  You bring on a contractor, if you are going to teach them both sides of the business, you train them and bring them up to speed, and they develop clients and they develop candidates, and they develop cash flow, and they are secure in that, why do they need you?  

From a standpoint, then you have no control over the metrics of all that work we are doing on systematizing your business to avoid an upfront investment, is my reading between the lines.  If they are a contractor, you cannot call it a draw.  You can call it an hourly rate.  I am not a lawyer versed in labor law, so I do not want to get too specific.  But I think you are making this a lot harder.  

My advice is always bring them on as an employee, especially for what you are trying to do.  You are building pretty much a new business unit, and if you put them under contractor law you are turning over much of your intellectual property rights to him or her and the huge threat you have to save a few thousand dollars on the front end is that you help them develop a business as a business partner and then when they are secure in developing that business, because they are a contractor and there is nothing you can do, they can develop the entire business, take the entire business from you, especially if they are developing both sides.  

What typically works best in a contractor role is, and maybe initially they can do both sides, but you have somebody doing business development and you have research sourcers because in contractor type roles you have hours, not weeks, to find the people, which is why it is an entirely different business.  But you need to be able to react.   

If he or she is brought on as a contractor, you suffer the scrutiny of the IRS, especially if you control any of their work function, if you control any of how they do the process, and especially if they are working for you full-time and they cannot show that they have another contractor role.  Again, there is a whole checklist I think at irs.gov under what a contractor does, and I just think you open yourself up to a ton of liability to avoid the upfront investment in a variety of ways.  

That is a really good question.  

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