Employee Vs Contractor: A Simple Breakdown When Hiring a Virtual Assistant

When contemplating adding a new member to your team, business owners have to consider whether to hire an employee or engage a virtual assistant. The immediate question they usually face is around cost. 

Factors to include in the actual cost of an employee

Base rate

This is the rate around which all discussions revolve. Whether it is salary or hourly, this rate is simply the starting point. 

Fringe benefits

As business owners, we may see “fringe” and think optional. But the government thinks 

differently. These are the costs employers are required to pay such as sick pay, social security, medicare, workers comp, etc. The Bureau of Labor Statistics states this cost is an average of 29.8 percent of the base rate. 

Overhead

Overhead consists of all the costs to manage an employee, including but not limited to:

• Equipment (desk, computer, phone)
• Administrative costs (payroll, time tracking)
• Training costs (including the payroll of the trainer)
• Access costs (software licenses)
• Management costs (mentoring, feedback, goal setting)

Hidden costs:

Hiring/Firing

What many business owners may not expect as far as the impact of hiring an employee can have are the costs of hiring and firing employees. Consider the time it takes to post a job, interview, make an offer, and then onboard a new employee. Further, the toll of firing an employee can be pretty high too. One has to gather the evidence that a termination is warranted, have the uncomfortable conversation, and then deal with the possible liability of a dissatisfied terminated employee.

Work amount

Another hidden cost is how much an employee works. An employee essentially gets paid for being in the office. If they are salaried and work less than 40 hours in a week, the business owner is still on the hook for all the costs associated with 40 hours of pay. If they are hourly, then overtime must also be monitored and considered. 

With the advent of remote work, there may be more flexibility to pay for only time worked but a lot of that depends on the remote work culture you set up. See our Remote Strong webinar series for tips on that.

Why a virtual assistant may be a better fit:

Virtual assistants are independent contractors. Their rate is the cost, all in. Business owners do not need to worry about fringe benefits and face minimal overhead (there is the cost of training them on your own systems, giving them access, and paying their invoices). Plus, they are hired for specific tasks so there is no risk of paying for time to simply sit around. 

At Freedom Makers, we are an agency. Working with us is even easier because we manage the selection of virtual assistants. If a client needs to replace their virtual assistant or even end their relationship, we handle all of that as well. 

If you want more control and do not mind the extra cost that comes with it, hiring an employee may be the route for you. If you just want to focus on the work that needs to be done, going with a virtual assistant may be the right choice. Either way, doing it yourself will only limit your growth and/or your personal life outside of your business! Focus on what you are good at and what you love, and let go of the rest!