Employed or Self Employed - Advantage or Disadvantage?

If you want to expand your business you need people to support you as there is no way you can do everything yourself.  But it seems that business owners are reluctant to employ anyone and would rather use an associate or a consultant than commit to someone joining their business.  Even if they need someone to do the day to day administration it has become more common to use someone who is self-employed.  Why is this?

The increase in the minimum wage and particularly the introduction of auto enrolment has increased costs for employers.  Some employers struggle with the thought of having to pay statutory sick pay even though it is only £89.35 per week (£17.87 per day) and the first 3 days are unpaid.  And some are not keen on paying holiday pay either.  So taking someone on on a self employed basis might seem like the perfect solution to avoid those unpleasant costs.  

But realistically whilst the business owner might be saving on pension contributions and holiday pay and employers national insurance what does that self-employed person actually cost?  The employee pay and the associated costs may be less than a self-employed person will charge.

Some people like to be self-employed because it gives them the freedom to work only when they want to but that may not be convenient for the business owner.  Like business owners, self employed people also have a responsibility to maintain and report their income and expense information to HMRC and soon they will have to be doing that on a quarterly basis.  

Of course there is always a place for associates and consultants and other individuals who have skills that you need to use on an occasional basis either to provide support to customers or to your own business.  IT support, marketing, website design, design and printing of materials are all aspects of our business without which we would not be able to continue but which, when you are a small business, do not justify employing someone.  We rely on the skills, knowledge and experience of those companies to guide us and support our needs

From my own business point of view I like to employ the people who work with me, whether it is for 2, 3, 4 or 5 days a week.  The people I employ do the core work of the business - bookkeeping, payroll, auto enrolment and training - and they are the team I rely on to provide a high standard of service to our customers.  I feel it gives everyone a sense of belonging and they work together to achieve the aims of the business.  They join in the successes and support each other through the difficult times.  For us this is the way our business works best.  

So why do some business owners never want to employ people.  Maybe they have in the past and had a bad experience.  Perhaps it is because they don't want the responsibility of managing those people and think they don't have to manage a self-employed person.  But everyone has to be managed because business owners have expectations whether that is from their employee or the individual or company who is providing them with support.

So what are some of the advantages and disadvantages of employing staff?

• Advantages - loyalty, commitment, sense of belonging, teamwork
• Disadvantages - managing lack of ability or attitude, employment costs

And some of the advantages and disadvantages of the self-employed?

• Advantages - no employment costs, no notice period, flexibility (for your needs)
• Disadvantages - lack of commitment, flexibility (for their needs), cost

I am sure there are many others that can be identified from your own experiences but from my own experience employing staff has worked well for me.  Sometimes my recruitment choice hasn't worked out as planned but when I have got it right I know that I have some great people who work well together and are good at what they do.  And I rely on outsourcing for things which aren't part of our business because I know that there are people who do a far better job of managing, for example, our IT and our website design than I could ever do.  

There is a place for employed and self employed in business and what works well for one business may not work for another but employing staff should not be discarded because of cost.  If you get it right they are an asset to your business.