Outsourcing Does Not Necessarily Mean “Offshore”

Whenever we hear the word outsourcing, we automatically have been trained to think jobs are going offshore (overseas). This is not necessarily the case, especially with small businesses. Today, small business owners are looking at everything they can to minimize expenses. The successful small businesses today are running “lean and mean.”

The smart small business owners are looking for the most economical way to accomplish the work with the least amount of fixed overhead. This is being accomplished by using freelancers, virtual assistants or independent contractors. They have always been around in some industries but now they are common in most industries.

The economy is making entrepreneurship the popular thing.  People are choosing to become independent contractors, not employees, so that they can run their own businesses.  Many prefer contractor status and will stay in that status as the economy turns around.

Some advantages are:

  1.  They work on an hourly or fixed rate of pay (if you do not need them then you do not have to pay them), unlike most small businesses that usually have ½ person too many or ½ person too little on their payroll.

  2.  You save the social security matching tax.

  3.  You do not pay benefits.

  4.  With the economy and layoffs the way they have been in the past year there are many people doing independent contracting work that are very well qualified.

Some of the disadvantages are:

  1. They are independent contractors, thus your control is limited.

  2. You may have to have several on-call since one contractor may have another company they are also working for and are not available 100% of the time you need them.

This is where you, the small business owner and the independent contractor, need to fully understand what defines an Independent Contractor or Freelancer, and more importantly how the Internal Revenue defines it.

I do believe that in the future the small business owner will rely more and more on independent contractors and freelancers. The small business owner will have to understand where to find these contractors such as on Elance.com and Freelance Union.org.