Employees VS Contractors

When you're running a business, sooner or later you'll need an extra pair of hands. You might take on someone full-time, or bring in short-term help for a specific job. Deciding whether to hire an employee or a contractor is an important part of growth. This is where the topic of employees versus contractors comes up, and getting it right really does matter. Heading into the new year, it's a good time to check that you're set up properly and that you're paying the right taxes.

The employee and contractor setups are different in lots of ways, from tax rules to what each can and can’t do. It is not always clear whether a person works best as an employee or as a contractor. There are differences in control, tools, and the approach to each task. And when you’re looking into options for support, whether it’s help with operations, admin, or accounting services, it’s worth knowing who fits where.  

What Makes an Employee an Employee?

An employee is someone who works under a contract and follows your rules and schedule. You are responsible for providing instruction and supervising their daily tasks. They usually:

• Have set hours and work on a regular basis

• Use your tools and equipment while on the job

• Do tasks you assign and report to you

You’re in charge of where they work, what they work on, and how it gets done. That means you're responsible for a lot of things behind the scenes too. For example, you must process PAYE through HMRC and make employer National Insurance contributions. Employees typically receive holiday pay and sick pay as part of their rights.

What is a Contractor?

Contractors are different. They handle their own tax affairs and don’t come under PAYE like employees do. Contractors can work through their own limited company, or as self-employed individuals or sole traders. You’ll usually agree on a fixed fee for a set piece of work.

They tend to:

• Work more independently and control how and when the job gets done

• Provide their own tools or systems

• Take on work for more than one client or business at a time

The key difference is in control, as they're not under your direct supervision in the same way an employee is. Many contractors are brought in for short-term or specialist projects, which gives you more flexibility. This arrangement may suit businesses that require expertise for a short period or need someone on an irregular basis throughout the year.

How to Decide What’s Right for Your Business

There’s no one-size-fits-all answer. The right approach depends on the kind of work, how much control you need, budget, and what your long-term plans look like. The person’s intended role, how they fit into your team, and the frequency of work will all influence your choice.

You might want to hire an employee if:

• The work is ongoing and regular

• You want control over the hours and tools used

• They need to be part of your team for a long period

A contractor might be better if:

• The project has a clear end date

• It needs specialist skills you don’t use often

• The person is only needed for a few hours a week or to cover seasonal work

Ready to Move Forward?

Knowing the difference between employees versus contractors helps you make confident choices about how your business works. As we head into the end of the year and get ready for a busy start to 2026, it’s a good moment to pause and make sure everything is set up right.

Clarity around year-end hiring makes a real difference, especially when roles shift in businesses. Choosing the right structure helps you avoid missed details when tax rules overlap with staffing plans. Our accounting services keep things simple, practical, and tailored to what matters most to you. If you are confused as to which way to hire get in touch, we can advise.