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Employees vs Contractors EBook US

Free Payroll eBooks for Small Business Owners and Startup Founders in the United States & Canada

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Page 11 of 19

Contractors can be a cost-effective alternative to hiring employees for your company, but there are more than just the advantages you need to be aware of when you make a decision to hire contractors vs. employees. Tax Benefits of Hiring Contractors There are no direct (government funded) tax breaks for hiring contractors, except that the employer is absolved from the responsibility of paying federal, state and local taxes. That does make hiring contractors a financially viable alternative for many com- panies, providing the correct client - contractor relationship is maintained. Deeper Dive on Contractors Tax Benefits, Pros & Cons of Hiring Contractors Pros & Cons of Hiring Contractors (1/2) PROS CONS Employer's don't need to invest in equipment, office space or any capital outlays as that is the contractor's responsibility. Additionally, the contractor is also responsible for all their own training in order to have the skills, which make them valuable to a client. Clients can't deduct any of those expenditures off their corporate tax bills. All taxes are paid and reported by the contractor, either as an individual, an incorporated business or a mix of the two. Contractors can be more expensive than employees due to supply - demand factors favouring contractors on the open freelance market (which is more international than the employment market; although that is changing for some sectors, depending on new immigration policies). Deeper Dive on Contractors | Pg. 12

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