Employees can definitely be a critical factor in the operation and profitability of a business. Yes, you may not be able to operate without the additional people, but also yes, if those people are employees, your business is responsible for a lot more than just their salaries and that might put the squeeze on your profitability if margins are tight in your marketplace.

So, if you are trying to decide if you will use Independent Contractors and avoid all those extra costs associated with employees, you need to be very conscious of restrictions and conditions required in order to be able to use those Independent Contractors. Here's a statement from the SBA:

What’s the Difference?

An Independent Contractor:

• Operates under a business name
• Has his/her own employees
• Maintains a separate business checking account
• Advertises his/her business' services
• Invoices for work completed
• Has more than one client
• Has own tools and sets own hours
• Keeps business records

An Employee:

• Performs duties dictated or controlled by others
• Is given training for work to be done
• Works for only one employer

Many small businesses rely on independent contractors for their staffing needs. There are many benefits to using contractors over hiring employees:

• Savings in labor costs
• Reduced liability
• Flexibility in hiring and firing