When Do You Hire an Employee or a Contractor?

For growing small businesses, being able to outsource is a flexible and cost-effective way to get the help you need to run your business.

Here are some criteria to consider when evaluating whether to outsource a function or activity or whether to hire an employee.

Consider the Duration of Your Needs

Carefully examine how long you need for the help will continue. If you are merely looking to staff a specific project , outsourcing to a contractor is the hands-down choice.

In addition to project work, independent contractors can be ideal in other situations where flexibility is top of mind:

  • When your business is growing but you’re still not sure enough of your future revenues to justify hiring a “permanent” employee.
  • During economic downturns – it’s easier to turn the switch on and off for a contractor if you have to scale back on expenses. Whereas, once you hire an employee it is emotionally, legally and financially more difficult to terminate that employee if you have to cut expenses.
  • When your needs spike due to a temporary or seasonal fluctuation – if you tend to have higher needs during the summer, for instance, a 3-month contractual arrangement may be just what you need.

Consider Your Budget

  • Compare costs. Generally, hiring an employee adds another 30% – 40% on to your costs due to workers compensation, benefits and other expenses, above and beyond salary or hourly rate. So, if you are comparing costs between hiring an employee and outsourcing to a contractor, be sure to compare apples to apples. Add in that additional 30% – 40% on top of the employee hourly or monthly rate. This article at the NFIB contains a good example of how to compare the costs of a contractor to hiring an employee.
  • Determine the breakeven point. Comparing costs will also help you determine the breakeven point of the number of weekly or monthly hours at which it becomes more expensive to use an outsourced provider. Once you cross over that breakeven point, if your needs are going to continue indefinitely or if you expect your needs to grow, that’s when you should consider transitioning to an employee. You may simply have outgrown your independent contractor for a particular function or task.

What Skills Do You Require?

An independent contractor is ideal when you need specialized expertise or skills. Often as a small business it is difficult to find and hire subject matter experts as employees.

That’s especially true because small business and growing businesses often have needs for 8 or 10 different skillsets – from bookkeeping to SEO to software development to marketing. But you may not need any of those skills full time.

It would be virtually impossible to find a single employee capable of the level of expertise you need in each of those areas. By hiring several different independent contractors, you are able to get the necessary skillsets, within your budget.

How Much Management Time Can You Spare?

When you outsource to a contractor, you do not need to manage the day to day activities of your contract help. This is heaven-sent for small businesses, because small businesses tend to be lean on managers.

On the other hand, when you hire employees you will have to devote time to ongoing day to day management. Giving work assignments, handling performance issues, training, and so on all take time. Be realistic. If you don’t have the time to spare for such management tasks take a strong look at outsourcing.

Remember that when you get an independent contractor, you typically are paying for an existing level of expertise in a particular field, not an entry level or “green” person. Plus the management is somebody’s else responsibility. You can expect a degree of independent execution that you often would not get with an employee.

Watch out for a Big Gotcha

Be careful to structure your arrangement so that you don’t hire an individual as a contractor, when that person really is an employee. If you are a U.S. employer, take a look at the 11-point IRS test for determining an independent contractor versus employee.

One way to minimize risk is to hire contractors who either (a) work for another company that is in the business of being a service provider, or (b) who are freelancers or sole proprietors, but who and take on other clients in addition to you. That way you’re hiring contractors who truly arrange their work as contractors, not as employees in disguise.

That’s why hiring an independent contractor through a marketplace such as Elance can be perfect. You’re much more likely to find contractors that serve multiple customers and make their living as outsourced providers.

In conclusion, consider all the advantages you can get through outsourcing. Outsourcing can be a cost-effective, flexible and easy way to staff a growing business. With outsourcing, you get a lot of benefits, without taking on extra headaches and workload you may not need or want, or which can distract you from important work you need to do to grow your business.


Top Web 2.0 Programming & Design Skills

I am sure many of you have heard the buzzword “Web 2.0”. For many, it may have been from people or design companies that say make sure your website is Web 2.0! In truth, Web 2.0 isn’t a new form of the internet. It is simply a word describing a trend that has been around for the last few years.

In short, a Web 2.0 website focuses on user experience and interactivity, allows users to share content, and is powered by a backend database.

For your next website, it’s important to know which technologies are associated with Web 2.0 as well as how each one can help you. In this article, I will describe each of the key technologies as they relate to user interface, search engine optimization and databases. 


One important concept of Web 2.0 is user experience – a good and user-friendly design is vital for any successful website. If you are trying to have the edge in the market, you need a design that is intuitive, easy to use and makes the user feel comfortable.

Once a designer creates a webpage design for you, a coder has the task of converting the design into a functional website. In order to do this effectively, and “Web 2.0”, the coder will need the following skills:

1. XHTML 1.0

What you see through your browser and the majority of websites you visit is a form of HTML, the programming language used since the early days of the internet. HTML has become the most widely used language for web pages. As developers and coders have become more comfortable with the language and design requirements have become more demanding, HTML has been upgraded, in a sense, to become more robust and flexible.

Today, with the internet delivered through browsers on many different types of devices including computers, mobile devices, cars, TVs, kiosks, etc., XHTML is the chosen successor of HTML 4.

The advantage of XHTML 1.0 is that it combines the strength of HTML 4 with the power of XML. XHTML is more strict than previous versions of HTML which makes it more compatible and easier to use with programming languages and databases. So when you are working with a designer or a coder, it’s important to specify that you would like your webpage to be ‘XHTML compliant’.

2. CSS

Cascading Style Sheets (CSS) is a fancy term to describe how web designers separate the layout and look and feel of a webpage from the content. Basically, CSS allows designers to match the design needs by creating a CSS file that holds all the information about how a website should look. This might make more since if you imagine this blog without CSS – it would be all text, wouldn’t have any colors, wouldn’t be spaced well, etc. … it would simply be the text you read, without any formatting.

What’s great about CSS is that you can create a CSS file that contains all the styling and layout information for your entire website. Let’s pretend for a moment that you had a website with 100+ pages. On each page there is a menu on the top. The buttons in the menu are green. If you wanted to change them to red, without CSS, you would have to open EACH of the 100 pages and change the color. With CSS, you would only open one file, and make a quick change and that change would be applied to every page.

I can’t stress the importance of a talented CSS coder. It’s one thing to create a CSS document, but another to create one CSS document that allows your webpage to look the same on Internet Explorer, Firefox, Safari and Opera browsers. This wouldn’t be important if every user that was going to see your website was using one form of the browser, but as I mentioned before, your users will be accessing your site through mobile phones, different internet browsers, TVs and more. So clean and compliant CSS code is a must-needed skill. That said, most if not all designers who use XHTML, will use CSS as well because they go hand-in-hand.

For a great place to see how CSS can dramatically change the look and feel of a website, visit CSS Zen Garden.

3. JavaScript

JavaScript is the most widely used scripting language on the internet, and is used mostly to add interactivity to web pages. It can also react to events on a web page. For example it can do something once a page loads, or validate a form once a user clicks “submit”. Because a user can disable JavaScript in their browser, it’s important to think about how JavaScript can be added and also that it’s not used just to be used. Rather, it should be used to enhance the user experience of your website visitors. Keeping focus of who your potential visitors are will help curb unnecessary implementation.

Pretty much all websites use JavaScript. Some web pages that use JavaScript that you might be familiar with are: eBay’s registration form – try clicking submit without filling in anything – and Amazon’s left-side menu – it gives you more options when you rollover a category.

4. Ajax

Ajax is an acronym for “asynchronous JavaScript and XML”, and is a skill people frequently associate with Web 2.0. It is used to increase the performance and experience of websites by allowing direct interaction with a server, without having to reload a web page. It will also send and receive small parts of a website rather than an entire page.

With Ajax, developers are making web applications function more like desktop applications, thus making web applications more rich and user-friendly. And because Ajax is becoming more popular, there are many available frameworks to help developers with implementation.

Some examples of Ajax are Google maps, which uses Ajax to load the content of your map. Another good example is Yahoo! If you start typing in a search in the top search bar, Yahoo! uses Ajax to find possible terms you may want to use.


1. SEO

SEO is a term used to describe the methods used to increase the ranking of your website pages on popular search engines. Finding a good SEO consultant is crucial to your new website. Be patient though, as a new website can take a little time to get the traffic and ranking results you want.

2. XML

Within the realm of SEO, there are things that should be done internally to your website to ensure that web crawlers such as Google and Yahoo! are able to index your site properly. One method of getting your site crawled and indexed is using a sitemap. A sitemap is a file, usually generated in XML, that contains links to every page of your website, as well as information about those pages, such as the last time they were modified and how often they change.

Another important use of XML, and maybe the most popular use, is generating RSS feeds. I am sure you have seen RSS icons on your favorite sites that allow you to “subscribe” to their feed. If you have a blog or provide news, an RSS feed is a must. It will help with your website circulation as well as visitor retention.


A key aspect of any Web 2.0 website is that it is backed by a database, as well as a server scripting language to talk with that database.

A database is where information can be stored. The data is stored in tables, with rows and columns. A website will usually have many tables making up the database, and they are typically organized in a way to increase website performance (responsiveness to traffic).

A server scripting language runs behind the scenes on web pages. When you load a dynamic web page, it will first pull information from the database, and then convert that data into HTML so that your browser can interpret it. It is important when finding a database designer to ask them about their methods of improving performance. A badly designed database can make your site slow and put a heavy load on the server.

There are several options for both the database and scripting languages, and I will briefly describe the most popular options, however, keep in mind that most ordinary projects could be handled using any of the technologies. I recommend that you describe your project to a programmer to ask which type of database and programming language they recommend.

1. MySQL

The most widely used open-source database in existence today, MySQL, can be scaled to handle small or medium websites, but also has the power to handle databases for the big boys. Just look at their client list. MySQL is free to use, and there is plenty of support and documentation.

2. SQL Server

Microsoft has their own proprietary database solution called SQL. Many larger companies use SQL because it’s backed by Microsoft. SQL developers may be a little harder to find and can be more expensive.

It’s difficult to say which is better – my SQL or SQL Server – or which you should use because they each have their benefits. MySQL usually performs better, while SQL is more impervious to data corruption. Again, I would recommend asking a professional what the best solution is for your project. Keep in mind that your budget may be a deciding factor.


A Web 2.0 website isn’t complete without a server scripting language. Basically this means every time a page is loaded, the script on the server will retrieve information from the database, manipulate or format that information, and then display it in a readable format on your browser. This process is usually very fast.

There are many choices for server scripting technologies. Like I mentioned before, the needs of your project and your budget mayl be determining factors for which one will suite you best. I will briefly describe the most popular options:

1. PHP

I start with PHP because it is by far the most widely used. It’s open-source (free), has an excellent community of developers, and is easier to learn than other languages. Sometimes larger companies shun PHP because it isn’t backed by a large company like Microsoft. However, this isn’t always for good reason, as PHP as proved time and time again that it can be just as effective as the other options.

PHP can run on many different platforms, and is compatible with most operating systems. It’s important to find a PHP programmer that is experienced with optimizing PHP so that it runs smooth and fast.

Large websites currently using PHP are AutoMart.com and Yahoo!.

2. ASP and .NET

Like SQL Server, ASP was created by Microsoft. It’s a very popular scripting language today, and is trusted by many websites to power their content. It isn’t cross-platform compatible, meaning you will need a server using a Microsoft Operating system to run it.

Large websites using ASP are Buy.com and Virgin.

3. JSP

A scripting language for the web built on Java, JSP is another approach. It’s more difficult to learn then ASP and PHP, especially for people without scripting experience. Also, creating a simple website with a database using JSP would probably be overkill. It runs slower than PHP and ASP and uses more resources, so using a shared sever wouldn’t be a good bet. There are definitely reasons to use JSP, but again I would recommend first defining what you are trying to accomplish and ask a professional for advice on implementation.

4. Ruby

A scripting language becoming more and more popular is Ruby, or Ruby on Rails. Ruby simplifies the process of programming because of its flexible framework. There are claims that developing with Ruby is 10 times faster than developing with other scripting languages. Like PHP, it’s open-source, or free. It’s been around for a couple years now, so finding a server that can host it is much easier.

Websites using Ruby are YellowPages and Twitter.

Must-Have Documents for Your Virtual Office

You and your Elance buyer seem to be a perfect match, and your project bid is on the verge of being accepted. But it’s not smooth sailing yet. What’s the easiest way to spoil what could otherwise be a great working relationship? Poor communication.

While using a PMB is the perfect way to share ideas, clarify points, and create a history of your discussions with your client, the most successful freelancers also rely on a handful of documents to ensure expectations, terms, and responsibilities are clearly defined – and to keep buyer/provider relationship positive and conflict-free.

A few documents that every freelancer should consider using during the course of their engagements are described below. We recommend that you consult your legal or business advisor for further information or advice about any document you create or are asked to sign. Elance provides examples for the purposes of illustration and for your convenience. These examples are not a substitute for the advice of an attorney. Of course, feel free to edit and create your own personalized copies; that way each time you need a certain document you can quickly fill out the document templates you’ve created.

Proposal Template

Clear, concise, and professional-looking proposals will not only define what you will provide – they’ll also set you apart from the crowd. Make sure your proposals define precisely what services you’ll provide, at what cost, during what time frame…and most importantly what the final deliverables will be. In effect, the proposal serves as the basis for the contract, so make sure you’re comfortable with all the terms of the agreement you propose to reach.

You may not realize it, but each time you bid on an Elance project you automatically create a proposal. If you’d like to take your professionalism to the next level, consider creating a professionally-designed proposal template you can upload through a PMB. If you don’t have great design skills, post a project in Design & Multimedia to get one created for you.

Standard Service Agreement

Once your proposal is accepted you’re ready for a contract. While “contract” might be an ominous-sounding word, a contract is really just an agreement between two or more parties to do something, for which consideration (usually money) will be exchanged. In most cases, a Standard Service Agreement can be the perfect tool for creating a clear and effective agreement. Simply specify the service you’ll provide (including any deliverables), and the timelines, costs, and payment terms for the project.

You’ll find other provisions on the sample Standard Service Agreement. Legal issues like confidentiality, intellectual property rights, and termination of the agreement are also covered.

Detailed Project Agreement

Some projects – especially complex, multi-stage, and long-term projects – may require a more detailed agreement. The Detailed Project Agreement allows you space to more fully describe your terms, deliverables, milestones, and project components. Think of it this way – if you agree to design a new logo for a client, the Standard Service Agreement should be sufficient. If you agree to design a logo, stationery, printed materials, a website – plus you’ll provide programming on an as-needed basis – and you’ll perform weekly SEO services – a Detailed Project Agreement will likely be more appropriate.

No matter which Agreement you use, make sure you clearly define the terms of the project. Use clear, easy to understand language – and no matter what, never sign anything you don’t fully understand.

Non-Disclosure Agreement (NDA)

A Non-Disclosure Agreement (sometimes called a Confidentiality Agreement) is a contract through which one party receiving confidential or proprietary information from the other agrees to keep that information confidential. Non-Disclosure Agreements are often used in the pre-service agreement phase. A provider may need access to certain information in order to bid properly on a project. If that’s the case, he or she may be asked to sign a NDA so the potential buyer can feel comfortable disclosing that information.

Say a buyer has thought of an amazing new Web 2.0 application. She needs a programmer to turn her dream into a reality, but she doesn’t want news of her idea to leak before she’s ready. She may ask you to sign a NDA before she shares those details with you. Don’t be offended – she simply wants to protect her intellectual property and wants your written assurance you’ll keep the information she discloses confidential.

Oftentimes a service agreement will include NDA provisions, but again, if your discussions with a buyer are taking place in the proposal stage, a separate NDA may certainly be appropriate.

In certain cases where both parties might disclose confidential or proprietary information to each other, a Mutual Non-Disclosure Agreement may be suitable.

Work for Hire

A “work for hire” clause transfers copyright from the creator to the hiring party. If you’re an employee of a company in the U.S. that transfer might occur automatically by operation of law. But, if you’re a freelancer, that transfer might not occur automatically unless you agree to “work for hire” language.

Say you’re a writer and you have been asked to provide a series of web articles. The buyer may ask you to agree to “work for hire” language, like the following:

“The final product will be the sole property of and copyrighted to the {Buyer}. {Provider} will not receive nor request further payments, royalties, or other considerations. {Provider} will not be named as the author or owner of the supplied work.

{Provider} expressly acknowledges that the material contributed is being specially ordered and commissioned for use in connection with this project, and is contributed as a “work made for hire” as defined by the copyright laws of the United States.”

In effect, you agree the buyer owns the articles and you relinquish all rights to them. That’s the essence of a “work for hire” clause, and it might make perfect sense in this case – otherwise, a buyer could pay for work that could appear elsewhere!