A business owner’s guide to hiring & the 4 types of employees

The right hire can improve your business in countless ways; contributing time, expertise, and valuable ideas. Deciding which type of employee to hire can be tricky, though. Every kind of employee offers different benefits—and comes with different challenges. 

That’s why it’s crucial to figure out exactly what you need and who’s the best fit. Keep reading for a breakdown of different employee types and factors to consider before hiring. 

4 types of employees 

Here are four common types of employees: 

Full-time employees

Full-time employees work at your business regularly, usually for 30-40 hours per week. When you hire full-time employees, you get consistent, skilled workers who have more time to invest in your operation. 

Hiring full-time (salaried) employees also means you usually offer benefits like health insurance and paid time off, as well as abide by federal laws like the Family Medical and Leave Act (FMLA) and the American Disability Act (ADA). 

Pros

• Long-term commitment: Most people seeking full-time work are looking for a position long-term. 
• Consistency: Full-time workers provide regularity and predictability in your business.  
• Greater skills: Full-time employees often end up becoming more confident and competent in their roles because they spend more time in their positions. 

Cons

• Higher labor costs: In addition to paying a full-time worker’s salary, you may also have to account for health insurance, paid time off, bonuses, raises, equipment, and other benefits. 
• Longer hiring process: Recruiting, interviewing, training, and onboarding a full-time employee can be time-consuming.  

Part-time employees

Part-time employees work on a part-time basis, usually anywhere from 15-25 hours per week. Hiring part-time employees is a great way to get regular support for your business without taking on full-time employee costs. 

Pros

• Lower labor costs: In addition to paying for fewer working hours, you may not have to pay for full-time employee costs like health insurance and other benefits. 
• Increased flexibility: Part-time employees let you accommodate your business’s changing needs over time, whether that means trying out a new position on a part-time basis, scaling down during slower times of the year, or hiring seasonal employees. 
• Expanded talent pool: You get access to a wider spread of job candidates, since part-time positions appeal to so many different types of people.  

Cons

• Less long-term investment: If part-time employees need to supplement their income with more work, they may not be as invested in your business long term.
• Potential for inconsistent work: Part-time workers may not accomplish as much during their shifts as full-time workers, so you might be left with incomplete tasks or projects. 

Independent contractors

Independent contractors perform work for your business on a temporary or fixed-term basis. Contractors generally specialize in one or two niches. They’re a great solution if you need expert support, temporary help with certain tasks, or someone to fill in the gaps as your business evolves. 

Pros

• Cost-effective support: Hiring an independent contractor is cheaper than paying someone to work full-time, since you only pay for the work performed—and don’t have to provide benefits. You can pay by the hour, per project, or on a fixed retainer. 
• Less work for you: You don’t have to train independent contractors, oversee their work, or conduct performance reviews.
• Flexibility: You can bring on contractors on an as-needed basis. Plus, you don’t need to onboard them, so they can start working right away.  
• Less tax liability: You don’t withhold taxes for contractors, so you don’t have to worry about accounting for their portion of payroll taxes. 

Cons

• Unpredictability: Because contractors are free agents, they work on their own schedules and terms. Contractors may not always be available on your business’s timeline.  
• Risk of employee misclassification: Some states have strict laws about how to classify a contractor versus an employee. If you misclassify an employee, you could incur penalties. 
• No universal pay standard: Every contractor charges different rates and has different payment terms, so you have to negotiate and agree on pay and work details for each independent contractor you hire. 
• Higher hourly rates: Contractors generally charge higher rates because they specialize, so you may have to adjust your expectations or budget. 

Agency

An agency is an organization you hire to consult or provide services for your business, whether in advertising, marketing, e-commerce, or finances. Agencies are a good option when you want to outsource a big area of your operations, though they can be expensive. 

Pros

• More time: Outsourcing work to an agency can save you and your employees time and headaches. 
• Expert support: You get hands-on help and expert opinions from multiple people when you hire an agency. 

Cons

• Intensive transition period: It can take a few months (and lots of back-and-forth conversations) to develop a rhythm with the agency you hire and ensure you like the work they’re doing. 
• Expensive costs: Hiring an agency can be pricey, since you pay on a retainer or hourly basis. 

4 key factors to consider before hiring

Before making your decision, consider the following factors and hiring tips for managers: 

1. How much work you have: Write out the various job responsibilities and tasks you need help with to get a better picture of the workload and time commitment. If you need daily customer service or sales support, you might want to hire a full-time employee. On the other hand, if you need help with a quarterly project that takes about 40 hours total, an independent contract could be a great solution. 
2. When you need help: Consider when you need more support, whether it’s as soon as possible or six months from now. If you have immediate needs, hiring a contractor is the fastest process. However, if you have more time to devote to the process of hiring and training, getting a part-time or full-time worker could pay off. 
3. Your hiring budget: Review your finances to figure out how much money you can realistically put toward a new hire. Your financial constraints will dictate whether you bring on a contractor, spring for agency support, or invest in a full-time employee. 
4. Your business goals: Consider what you want to achieve with your business in the next year—as well as the next five to 10 years. If you want to expand or open a second location, hiring a full-time business development employee or marketing agency can help you get there. On the other hand, if you want to narrow your niche or keep your workforce nimble, you might want to hire part-time workers or independent contractors. 

Finance your next strategic hire with Funding Circle

If you need more capital to invest in hiring, consider Funding Circle for small business financing. You can use a business term loan or business line of credit to pay for job site subscriptions, purchase new equipment or hiring software, revamp your training process, and finance someone’s salary. Learn more about online loans or apply today.

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