One of the most common problems of small and medium scale businesses is the lack of manpower. Because of budget constraints, it is difficult for entrepreneurs to hire new staff.

If you have the same problem in your company, one of the options you have is to hire independent contractors.

An independent contractor can be a person, or an organization (like a business) or corporation that provides products and services to another entity. Examples of individuals who can be considered contractors are doctors, lawyers, and accountants; as long as they are engaged in an independent trade or profession and they are in control of how they perform their tasks.

The advantage of hiring independent contractors is that they are results-based, so you do not need to supervise their actions. You also only need to keep them during the duration of your agreement. And since they are not employees, they do not need to pay employee relates costs like Social Security and employment taxes.

Independent contractor are not employees

Before hiring independent contractors to supplement your workforce, you should know that you could get in trouble with the IRS if you classify your worker as an independent contractor when they should be classified as an employee.

According to the IRS, an Independent contractor should be in control of their own actions, unlike an employee whose work is dictated by you, as the employer or by a supervisor or a manager.

Here are the three types of control that a worker should have to be considered an independent contractor:

• Behavioral control – This is the type of control that refers to how the person does his task. Do you provide training and/or instructions? Do you have an evaluation system? Do you have a say on his production process? If the answer is yes to any of the questions, then you have an employee, not an independent contractor.

• Financial control – This is the type of control about the economic aspect of the business. If you have provided resources to the worker, then he should be considered an employee. Even a simple RingCentral company phone extension might even be considered a resource. The fact is, Independent contractors are considered as their own company capable of providing its own resources, and has the ability to gain or lose profit.

• Type of relationship – Your relationship with the worker will also determine whether they are contractors or employees. If the worker is hired for an important task for an indefinite period of time, it is more likely that he should be considered an employee.

Independent contractors are pretty handy for delegating non-important aspects of the business that can be finished in a specific duration. They are not there for employers to replace employees, but rather are options to support the current workforce.