When you’re running a fitness studio or gym, one of the biggest decisions you’ll be faced with is figuring out the best way to grow your business. When’s the right time to expand your staff? Should you add more employees to your team or is it smarter to hire contractors? The answer can vary business to business, depending on your circumstances.
Before you make your next hiring decision, you’ll need to weigh the pros and cons of hiring an employee versus an independent contractor. It’s helpful to familiarize yourself with the Fair Labor Standards Act (FLSA), which lays out the rules when it comes to employees and independent contractors. Not following the law can hurt an employer (who may get hit with fines) and the employee (who may lose his or her benefits), says Karen Bender, a human resources consultant for Hausmann Johnson Insurance in Madison, Wis.
Talk to a labor attorney or an expert about the FLSA so you understand what your obligations are when it comes to hiring a contractor. “[An independent contractor] cannot be committed to one employer full-time for an extended length of time (shorter term gigs are fine) or they become an employee,” explains Bender. “This is a simplification of the law and only one aspect, but it should give an idea of one of the major issues to consider.”
We rounded up the most important pros/cons to consider when deciding between hiring an employee or an independent contractor.
The Pros of Hiring an Independent Contractor
The biggest plus of hiring an independent contractor is that you’ll save money on employment taxes and other costs you’d otherwise have to cover for employees, says Nadia Walker Arnold, co-owner of Barre Forte in Denver. When you hire a contractor, you won’t withhold and/or pay income taxes, Social Security, Medicare, and unemployment taxes. You also won’t need to offer health insurance and other benefits.
Though it’s not your responsibility to handle these things, you still need to make sure the contractors you hire are following tax laws. If they don’t, your studio or gym could be at risk of being audited by the IRS. When possible, it’s a good idea to work with a staffing firm who will assume all liability and make sure employers and contractors follow the law.
Since contractors aren’t full-time, you have the flexibility to increase or decrease their hours depending on how busy your studio or gym is. You can also decide not to give any hours at all during a slow period and let the contractor know the hiatus is temporary. This scenario is a lot better than having to cut employee hours or worse, let someone go.
The Ability to “Try Before You Buy”
One of the best ways to find the right fit when hiring is to bring someone aboard as a contractor to see if he or she is a good match for your studio or gym. Think about hiring a contractor as hiring an employee on a trial period, without any obligations.
Keep in mind, however: If you hire a trainer as a contractor to develop something for you—like a new class—you won’t own the product unless the trainer signs a contract that whatever he or she creates for you will be owned by your gym or studio.
The Cons of Hiring an Independent Contractor
You Can Only Expect So Much
The reduced costs and increased flexibility you get when hiring a contractor come at a price to studio owners. “The cons I have experienced are that contractors do not have to attend meetings, sell, or do anything outside of just teaching a class,” says Walker Arnold, adding that there isn’t much a studio owner can do to make sure a contractor sticks with a specific schedule. In other words, a contractor isn’t locked into following a schedule the way an employee is.
Most Contractors Won’t Be as Invested as Employees
Put simply, the long-term success of your studio is not a contractor’s first priority. Full-time employees tend to be more committed to the overall success of your studio. Contractors will work to do a good job so they can be rehired but tend not to be as loyal and committed to your gym as employees.
Full-time employees tend to be more committed to the overall success of your studio.
The Pros of Hiring an Employee
It Boosts Morale
While contractors are hired for a specific job (like teaching a class), employees are brought on board with the big picture and long-term goals in mind. They have more time to train, get to know your culture and contribute ideas to meet your studio’s goals.
When thinking about you studio’s core values and culture, it’s important to remember that employees are the ones who will help turn those ideals into reality. Employees will go the extra mile to meet goals and live by the values your studio puts into place.
Continuity and Studio Values
It’s no secret that employees offer longevity, loyalty and continuity that you won’t get with contractors. Any investment you make in professional development will have a bigger payoff with employees who are part of your team. And when studio owners invest in employees, they’re more likely to want to contribute in new ways and expand their role in helping your studio succeed.
The Cons of Hiring an Employee
On top of a salary or hourly wages, you’ll need to factor in the cost of medical benefits and vacation time. Full-time staff will always be one of your biggest expenses as a studio or gym owner. And you’ll need to pay their salaries on time, even when things are slow, so you’ll need to have a reserve of cash flow in the bank.
Training and Development is Your Responsibility
Contractors are under a lot of pressure to do a good job so they can continue to be rehired or considered for more work. Because of this pressure, they tend to be well-trained and well-versed on industry best practices. Employees, on the other hand, aren’t as exposed to what competitors may be doing. That’s where you come in—you’ll need to invest your time and money to make sure they’re trained and up-to-speed on what’s happening in the industry.