No tax responsibilities
With regular employees, employers must handle federal, state, and local income taxes as well as Social Security and Medicare taxes. When an employer withholds Social Security and Medicare taxes for their employees, they must make a matching employer contribution.
Because contingent workers are not employees on your client’s payroll, your client is not responsible for withholding and depositing employment taxes like they would for regular employees. And, they do not need to make an employer contribution for Social Security and Medicare taxes.
If the contingent worker is an independent contractor, they will need to pay self-employment tax. If the contingent worker is one of your contract workers, you will need to withhold taxes from their paychecks.
Less financial obligation
Generally, a business must spend money on benefits to attract and retain employees. Your client does not need to offer health insurance, personal time off, retirement plans, or other contract employee benefits to contingent workers.
Your client only needs to pay contingent workers for the work they do.
Saving money on benefits as well as eliminating annual salaries can be a relief for many businesses. Plus, your client saves money on Social Security and Medicare tax contributions, as well as unemployment tax payments.
Hiring an employee is a big commitment. Your client might not need to add a permanent employee to their workforce to complete certain projects. When your client hires a contingent worker, they have more flexibility. The worker is only hired for a specific amount of time.
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Let’s say your client needs to set up a website for their company. They need a web developer to create the website, but they do not need their services once the website is up and running.
Hiring contingent workers can also give your client more options. Some workers want flexibility and don’t want to be tied down to just one job. With contingent staffing, your client can open up the job to attract a wider array of job seekers, which is especially important for finding individuals with technical or other specialized skills.