Hiring Workers in the Micro or Hybrid School: Employee or Contractor?

If you are looking to hire for your program, you might be in the process of deciding whether you need to have employees or contractors. First, you should understand the difference between these designations.

An employee is someone on your payroll who has taxes withheld, and who your business must pay employer taxes for. A contractor is someone who receives pay with no taxes withheld, there is no employer tax to pay, and the person is responsible for claiming the income in her personal taxes (using the 1099 that will usually be generated through the payroll system at the end of the year).

A contractor usually costs a little less for the business because of the savings on employer taxes, however contractors usually require a higher rate for their work (partly because they have to pay their own taxes which costs more for them usually).

So why choose one over the other?

As much as a contractor might sound like the easier choice, it’s not quite that simple because you don’t just get to choose. Legally, a contractor is contracted for the good or service they provide and they can choose for themselves how to deliver it. As soon as you start telling them how, when, and where to work, you are getting into employee territory. A teacher or aide showing up on set days and hours and delivering a curriculum you give them the way you want should be an employee. A bookkeeper whose job is just to keep your books, using their expertise on their time, can be a contractor, as might be someone helping with your website. These latter people are being contracted for their expertise in delivering a specific end product. The former is being hired to deliver your service your way.

For the micro or hybrid school leader, it is important to strategize how many of each type of worker you will need as you budget. Remember that you will need to budget for employer taxes for all employees and that is not insignificant!

You can read more about these distinctions on the IRS site.

Hopefully this helps you to plan. Remember that both types of workers can be paid through a payroll system, but the payroll system will be most useful for employees because it will take care of both the withholding and the employer taxes for you (employees will be entering their information into the payroll system for withholding when they are hired. This is part of the onboarding process. Once the information is in, the payroll system will take care of the rest). If you are hiring an aide, or teacher, chances are pretty good they should be an employee.