Most first hires should be contractors, and most people choose contractors for the wrong reason — to avoid paperwork rather than because the arrangement genuinely fits.
When a contractor fits
- The work is project-shaped with a clear deliverable.
- Demand is still lumpy and you need to scale up and down.
- The person genuinely works independently, on their own schedule, with their own tools.
- You want to test the shape of the role before committing to it.
When you actually need an employee
- You need set hours, or the work is continuous rather than project-based.
- You want to direct how the work is done, not just what gets delivered.
- The role needs to accumulate context that walks out the door with a contractor.
- You want loyalty and availability, which are things you have to pay for honestly.
The trap is treating someone as a contractor while controlling them like an employee — setting their hours, requiring your tools, forbidding other clients. Classification rules differ by country and state, penalties land on the business, and "everyone does it" is not a defense. Worth a conversation with an accountant before the first payment, not after.
Whichever you choose, write it down: scope, rate, invoicing schedule, who owns the work product, notice period, and confidentiality. A one-page agreement prevents most of the disputes that end these relationships badly.
Try it
Write the arrangement you are planning, then check it honestly against the two lists. If your "contractor" has set hours and no other clients, you are planning an employee and should price it as one.