How to Decide if You Should Hire a Contractor or an Employee

Oct 30

Growing your business will almost definitely require you to grow your team. Many online business owners default to hiring multiple independent contractors in specialized roles to meet their needs, but that's not always the best choice. There are important differences between independent contractors and employees that you should be aware of before growing your team.

In this episode founder of Hire Breakthrough, Kimone Napier (she/her), joins the show to answer our questions about how to decide who to hire and how to find the right person for the job.

Watch the Episode:

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Questions Answered

How do you know if you should hire an independent contractor or employee?

Once you've decided to hire, how do you make sure to find the right fit for the job?

Here’s what you’ll hear about in this episode…

(3:30) - When is it time to hire a contractor vs an employee

(6:45) - The legal guidelines around independent contractors

(8:00) - Hiring for the team you need to grow your business to the next level

(11:30) - Prioritizing spending in your business

(16:00) - How to find the right person for the role you are hiring for

(20:00) - Creating specific interview questions to find the right fit

(22:05) - Levelsetting expectations around the hiring process

Do you have a question you’d like to hear addressed on a future episode?

As part of Fruition Growth Network, you can submit your questions related to being a human running a small, lifestyle business and have them answered by one of our expert contributors. You can expect nuanced conversation and expert guidance just for you, and you don’t even need to wait for new episodes to drop. As soon as we record your response you will get access to the full video interview. Join Fruition Growth Network here!

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Links + resources referenced in this episode

Connect with Kimone:

Website: https://hirebreakthrough.com

Instagram: https://www.instagram.com/simplykimone

Transcript

Brooke Monaghan: 0:46

Welcome back to another episode of Make your Business Work For You. Today's episode is a Q&A yes, I'm leaving that in. It's a Q&A episode with my friend and colleague, Kimone Napier. You heard Kimone in our last Q&A episode about building a business with a new baby at home. After I got Kimone's wisdom on that, I asked her to stick around to answer some questions about hiring, because Kimone actually runs a recruitment agency and with my leadership coaching clients, I have witnessed so much confusion around when should you hire an independent contractor, when should you bring in an employee? How do you find the right person for the role. I put some of those questions together and had Kimone answer them today. Here's the thing. Maybe you're thinking about hiring. This is going to be a really important episode for you. Maybe you're not. If you're a service provider and you yourself are an independent contractor, I actually think this is a really important episode for you to listen to, because what I have found is that many independent contractors are not actually aware of what their clients can or cannot actually ask of them, what their rights are in those kinds of relationships. I also think that this could inform your conversations with your potential clients about why you as an independent contractor versus an employee, because sometimes it makes sense to bring on someone in a very specialized role versus an employee. This is just important context that I think all of us who are in small business should be aware of. Before we get into the episode. A couple of things I want to fill you in on. The first thing is that doors to Fruition Growth Network are officially open. If you go to joinf ruition. com, you can create your free account. We have a free tier of the membership and we also have paid tiers of the membership. The Tend tier, which is usually paid, is free for the month of November. This includes our guest facilitated workshops. It includes access to training camp, which is my signature course. All you've got to do is just go and set up a free account and it's just automatically all going to be in there for you for the month of November. It's pretty easy. Just joinf ruition. com. Once you're in there, you can also register for any of the live events that you'd like to attend. In November we have two free co-workings happening. We also have a networking event for people who hate networking. We have a guest workshop with Tristan Katz on creating meaningful and effective content for your business happening at the end of the month. That first co-working is on Friday, November 3rd. So join fruition. com set up that free account, you can register for that and come and join us. Finally, if you have been enjoying the show and you have not yet left a rating and a review, those make a huge difference to me and the podcast. This podcast is a big part of what is going to keep Fruition Growth Network going. One way that you can support me is to go to Apple Podcasts and leave a rating and a review for the show. Also, sending any of these episodes to someone who you know could benefit from hearing them is a big help as well. All right, enjoy today's episode and I hope to see you at our co-working on Friday. Let's start with navigating whether or not you should be hiring independent contractors or employees.

Kimone Napier: 4:17

Yeah, sure. So typically for those who don't are not aware, I have an HR background and the business that I started was a recruitment business. That was a part of HR that I always truly love. We help business owners, startup companies to actually find and retain their talent. These are questions that I get all the time. I would say if somebody is trying to figure out whether they should go employee versus contractor, it depends on things like your revenue and stuff like that. It depends on the duties that you want the person to do. In terms of revenue. Let's say you just hit your first six figures. Your default might be to hire a contractor and that's okay, but six figures is from $100,000 all the way up to $999,000.

Brooke Monaghan: 5:08

Thank you for clarifying.

Kimone Napier: 5:10

Yeah, when I hear people talk about six triggers, I'm like, okay, let's get into the numbers, because a hundred thousand dollar business and a nine hundred thousand dollars business is very, very different. Yes, so if you're at the beginning stages of that, hiring a contractor is okay because of course you're, you are probably not like in the financial place to be able to afford necessarily an employee, maybe like a part time one, but not like a full time employee. When you're starting to climb to like, let's say, like mid range, like 250k, 500k around there, you want to start to think about hiring an employee because the needs of your business is going to change. That's what people don't understand. There's going to come a time where you're going to need somebody fully dedicated to your business, and when I say fully dedicated, I mean they're working specifically on your business. The problem that I see with contractors for a lot of people is typically contractors have other clients, so there's always this push and pull. So like, for example, maybe the way your business is set up, you need launches, you hire an independent contractor, they help you with these launches, but they also have other clients that they're launching for. So those clients launches are going on right, there's this push and pull energy, like you may feel like they're not showing up the way they need to show up for you, and that's just what it is when it's an independent contractor. Now, what some people do they might go through some type of agency and hire a contractor but at the same time, that's not guaranteed because that person could leave that agency at any time and then you'll be replaced and starting for the ground up and you don't have any ownership of this person. And that's what people need to understand is that you don't. You're not entitled to this person. You signed a contract with the agency and that's really more so about it. So, when you're in the mid range, start to consider to hire an employee because of the dedication that you're going to need and the whole nine yards. And then you know, with the IRS standard, with contractor versus employee, a contract is very specific. Typically, typically, what you're seeing a contractor is like based on project. So if we based on the IRS guidelines, if the work the person is doing is contributing to, like, the daily operations of the business, technically that's considered an employee under IRS guidelines. And so a lot of people don't necessarily realize that, but these are the kind of things that you need to keep in mind. With that, also with the contractor, you are not supposed to have any control over their work hours. So it's more so like this just needs to get done, but like saying like, okay, you need to be available Monday to Friday, nine to five, or like 11 to five or whatever it is that's considered an employee. So the law is very, very specific. And if you're getting to a place where you're like, okay, I need more specialized help, I need more dedication, that's when you want to consider hiring an employee, because there's also tax benefits too with employee and I think people don't realize that, there are benefits. So if you're hiring an employee like, for example, I know here in New York, there's like grants that you can get for for having an employee and stuff like that. So there's, there's all those those things. So the legalities is one part, but in terms of like understanding your need, you have to really understand where your business is going. Because if you keep saying like I have people say it all the time I want seven figures, but you're not operating in the space to be able to get the seven figures. Like and, for example, like the biggest contractor, most common contractor role, I see, is the virtual assistant. And I tell people all the time like, yes, they have a specific part of a business if you're like online business. But this is not the end all solution when it comes to hiring, and this is where people get so frustrated because they're like I hired a virtual assistant, they're not doing what I need them to do and I'm like what you're trying to do is hire a number of people into one role and that's not the way that this works. Anything I see virtual assistants promising like I could do office, I could do marketing, I could do all these things, I guarantee you. I always tell people unicorns don't exist. There's going to be one specific area that this person is going to show up better than other areas, or eventually, what's going to happen? They're going to get burnt out. That's when I see a lot of business owners are scared to hire. So sometimes a virtual assistant is not your answer. They have a very special place on a team, but as you're continuing to make more money, taking more clientele, you're up leveling and scaling. Your team is going to be required to look different Because you, as the leader in your business, has to show up different. Because a six-figure business and I'm talking low six figures to high six figures, seven figures, even eight figures looks totally different in terms of team and then what I normally see people who rely on the virtual assistants and stuff like that then they have issues with client retention, or people are not hearing back from them, or you as the leader, you're starting to have to implement more rather than you're out there selling and getting visible and things like that. So you have to consider all of this when you're considering to hire even a contractor or an employee.

Brooke Monaghan: 10:36

Yeah, one of the things that's coming to mind something that I've definitely seen come up with clients of mine that I've worked with at that more mid six-figure range too is they have a very specific need and are trying to find the right independent contractor to fit into that role, but don't realize that as an independent contractor, they're going to come to you and say this is what I do and this is how it works, and it's like you were setting yourself up for a very difficult search. If you are trying to find a person who's going to come to you and say this is exactly what I do and it's going to match exactly what you need, versus with an employee, it's like job description here's how I'm going to train you to do it, here's when you're going to be available. You're creating the role versus them creating the role and then wondering why it's not really working out the way that you need it to work out.

Kimone Napier: 11:32

Exactly. I think people also default to it because it's easy. Yes, in their mind they're like, well, I'm not required to pay this person. This is the conversations that people think and they have I'm not required to pay this person. If I need another one, I could get rid of this person. This is how I've heard people think, but I always say to them I'm like, whether it's an employee or contractor, every time you have to do it, you're spending money. Yeah, and that's what people don't realize. And half the time, when we look at the numbers, I'm like you could have hired an employee to begin with. And save yourself pain and suffering.

Brooke Monaghan: 12:08

Yeah, and this is OK. I have now said this twice on this podcast, so apparently I feel strongly about it. It's like the things that people are willing to get help with or spend money on and then the things that they're not blow me away. So if you're willing to spend thousands and thousands of dollars to be in some high-end mastermind but you are not willing to pay a CPA or someone to help you figure out how to legally have employees like, you've got to get your priorities in order, because that is like some weird online business bizarro narrative that has worked its way into our brains where we think that but it's going to be so expensive to go to a lawyer and it's going to be so expensive to go to an accountant and that's going to be so hard. So I'm going to do it this way it's not as expensive as some of the other stuff that you're spending money on and also have the peace of mind that you're doing it the right way, because the other thing that I mean this is something that you and I talked about when I interviewed you for my other podcast is that if you have a quote independent contractor who is operating as an independent contractor, but you're actually legally treating them as an employee. It does not matter if you have not been calling them an employee that whole time or if you didn't set things up that way. It's like you're legally obligated now and now you might end up in a situation where you've got some penalties or shit that you have to deal with that you could have just avoided if you just Got someone who knows what they're doing to help you get your ducks in a row. It's not gonna be that bad.

Kimone Napier: 13:44

Yeah, it's not exactly. And your comment about the mastermind is so spot-on because what I always tell people like, yes, everybody does need coaching at some point. But I always tell people you go into the high masterminds and then what they're teaching you to do you have to remember, you have to pay the mastermind and then you have to Find the money to implement whatever it is they're telling you to do. So if you go into the mastermind, they're telling you to hire employees. Well, if you just paid Five figures, high five figures, even six figures for this mastermind and you have to figure out the money to do all this other stuff, it's kind of like you just got yourself into a situation when what you could have done is Hire an expert, hire an employee to actually help you specifically with this. I always tell people there comes a time where you have to hire more specialized help versus coaching. Like it's two different. It's two completely different things and I think people often confuse the two. And then they're stressed, and I'm like you're stressed because what you need to do is hire employees. You need hands, you need people to be able to implement the stuff that you want to implement and you know, if you're going into mastermind and you're paying them all this money and all they're telling you to do is hire virtual assistant. I Mean I would, I would be remiss if I didn't say you need to really look at this investment, because I can tell you people who are at the million dollar mark eight figures, nine figures they have teams, yeah, they have people working to help them, because if they don't, you can't take a vacation, you can't do any of that stuff, and that is that really the kind of business or life that you envision for yourself? So those are, these are questions you should be asking yourself.

Brooke Monaghan: 15:33

Yeah, and if you're looking at hiring, if you're, if you are feeling the pressure of needing to hire, probably the reason for that is because you are feeling like you need help with implementation, not ideation or strategizing. And so if you need help with implementation, no amount of I'm gonna tell you what to do or coach you through problem-solving around things is really gonna stop like you're still gonna need help with the implementation. You're still gonna have to turn around and do it. So

Kimone Napier:

Exactly

Brooke Monaghan: And as a coach, I recognize I care, I love coaching, I think that coaching can be great for a specific type of person, but sometimes it just gets out of hand where I'm just like I do not understand. I have cannot tell you the number of people who I'm like you need to go for to a lawyer for that, and they're like I, like I have to go to a lawyer, it's gonna be so expensive, and I'm like let's talk about this program that you just joined for like five thousand dollars, like what, what? I don't get it. Anyways, okay, now I'm getting judgmental. So let's say that somebody has then decided like okay, I'm gonna hire an employee. Or they now know the route that they want to go. Even if they do want to hire like an independent contractor, they're clear on the route that they want to go. What are some of the first things that people should consider or do to try to find the person who's like the right fit in terms of they can actually perform the role, but also like they're a good fit to work with you. How should people get started with that?

Kimone Napier: 17:07

So the first thing is that when you're deciding, like okay, I need to hire somebody, the first thing is establish your hiring budget. Figure out, like okay, how much is it that you can afford to pay somebody. And if you realize, like okay, I don't have enough to afford to pay somebody, it's like I tell people approach it like a cash injection, like if you wait to the moment that you really need somebody, it becomes harder. But if you plan ahead, you can start to set aside the reserves, just like you do. if do profit first, you set aside reserve for taxes and stuff like that. Approach hiring just like that, and have like an account where it's solely for that for team, because it makes it so much easier for you. So that's the first thing. The second thing is like okay, you're like, okay, this is the person that I need. Now I need to figure out who it is that, like I want to hire. You need to create like almost like, an avatar for this person. Now, when I say avatar, I mean like. I don't mean like, okay, this person needs to look a certain way or anything like that. What I mean is what's the skill set that they need to have? Like the experience, the education necessary, necessary. What is it that you want them to believe about your company? Like, are they in alignment with your company mission? Where is it that they want to go, maybe in the next three or five years, and is that in alignment where you want to go with your company as well? So you want to have this profile so it makes it easier for you to pick out the ideal talent for the role. And usually people don't do this, they skip this part. But it really does honestly help, because if you're also in a situation where you start to try to find the talent and you're getting these applications, it becomes very overwhelming, especially if you don't have somebody dedicated in your business to actually like manage this process for you. You're going to have to do it yourself as the leader, and it takes time. Like I always tell people like it takes like literally like 68 hours for like from start to finish, to actually find the talent, screen them, interview them, all that kind of stuff. It requires a lot of time. So if you don't have a lot of time, you want to make sure you do some of these steps to make it easier for you in the process and to make an informed and a not biased decision, because sometimes I see a lot of business owners. They hire people that are like them, and usually you don't need somebody who's like you. You need somebody who is opposite of you, somebody that their strengths are your weaknesses. To balance the business out is what you truly need. So you want to make sure you have all that stuff like it's almost like a rubric or a scorecard for yourself as you're screening these applications and stuff like that and then you know the kind of questions that you need to ask in order for you to make an informed decision. As to like, will this person be able to help me? Because you know, if you guys have the same you like the same color and the same food, that doesn't mean this person is going to be able to operate in your business, but you'd be surprised at the way people get into jobs and the way they get hired. This is the way that you shouldn't do it, but if you follow these three things that I'm talking about, it makes it easier for you to actually pull out the talent that you need to really help take your business to the next level. So that's how I would recommend everyone approach it when it comes to hiring and finding quality talent.

Brooke Monaghan: 20:33

Yeah, I love that. I love how like just straightforward you are Ki mone. One of the things that I used to do a lot when I was hiring people in other roles and like doing interviews is I would if there was ever any kind of anxiety around like, but what if we get the wrong person again? Because, especially in roles where that I had, where, like there was turnover with a certain position. Well, what if we get the wrong person? Whenever there's anxiety around that, I would always try to talk to people on the team about like, what would it look like for this to go wrong? Like, what are you worried about happening? What is an example of not the right fit? What behavior specifically was not good and didn't work? What specific behavior are you worried about? So then, that way we could like then be like okay, well, this is how we want people to handle it instead, and then we could create interview questions around that, or like case studies even, or example questions when it's like okay, here's an example of a thing that happens in the role. Tell me how you would approach that, and you can kind of head that off at the pass, because I find that it's one of the things that holds people back from hiring the right person for the job, versus just someone recommended this person and so I just hired this random VA and now I'm just having them do this stuff because so and so said they were great. One of the things that holds people back from going out and doing an intentional search is like they're just worried about putting so much effort into it and then they get the wrong person, and so it's like, if you're worried about that, get specific about what the concerns are and ask questions that allow you to understand whether or not that person is going to approach things in a way that you would want them to approach it. I've even had situations in past jobs where, like, we would give specific case studies kind of like ahead of time, like this is a situation that we're going to ask you about. We want you to take a little bit of time to think about like how you would approach this to get like their thought through, considered response and not just try to like catch people and like actually get to know how they think about things. So yeah, just throwing that in there for additional thoughts.

Kimone Napier: 22:44

I think the problem is people don't, they don't estimate the amount of time this is going to take, and so what they do is like I'm going to throw up a job description and find somebody, and that's the default. That's why the hopes and dreams that you have when it comes to your team are not being met. Like that's where a lot of people get frustrated with hiring and so forth, and I think it's also a reason why people default to the contractor thing is because they don't want to spend the time. Like business owners tend to default straight to sales and marketing. But as your business grows, things like financials, legal, HR, recruitment all that stuff is going to be very important because you need those aspects as you continue to grow. It's like you know it's more. It's like more. It's like no reward without risk. And as you continue to make more money, there's more inherent risk, right, there's other laws you have to follow, Like you might get audited by the IRS, like there's all these things that comes into perspective, and so you need to be prepared to handle a lot of those things. So, for example, like when you start to hire, you need to be prepared like how am I going to train this person? How am I going to like acclimate them into the team and how this team works, and stuff like that. So those are the kind of things you need to think about before you even start hiring, because it makes the process a little bit more seamless, yeah.

Brooke Monaghan: 24:10

Thank you, Kimone.

Kimone Napier

Of course.

Brooke Monaghan

This was so fun. I appreciate your wisdom so much.