Hiring employees is expensive and complicated. Among other things, there’s superannuation, insurances, and tax withholding to worry about, and entrepreneurs often feel that they have enough on their plate as it is. Fortunately, there’s an easy way to get access to the labour you need without most of those pesky additional responsibilities. Increasingly, startups and small businesses are leaning on contractors and freelancers to provide the labour they need to grow.


However, contract labour was never meant to replace traditional employment. While it looks like an attractive option, trying to use contractors as a replacement for regular employees could actually be getting in the way of your business’ success.

Why contract labour is so popular

Before we can look at why businesses shouldn’t be too reliant on contractors, we need to examine why we do hire them, and what makes them such a great tool for businesses.


Unlike regular employees, contractors’ jobs aren’t legally protected. They only have as much job security as is specifically stipulated in their contract. This makes them perfect for tackling temporary projects with a limited scope. Once the work is done, you can simply terminate the contract, or offer another project as is convenient.

Fast access to skilled labour

New employees usually take weeks or months to train properly. Even experienced workers need to acclimate to how things are done in your business and to get comfortable with your clients and their responsibilities. Contractors don’t generally need to work this way. Unless they’re forced to integrate into your business, they can operate independently, immediately applying their own expertise and way of doing things to the task you’ve hired them for.

Uncomplicated relationships

Your relationship with your contractors need only be as complicated as you would like them to be. At its simplest, you might simply set a task and a due date. On which days a contractor goes on vacation, is sick, or chooses to work doesn’t need to be of any concern, greatly reducing the need for active top-down management. Of course, most contract relationships are more integrated than this, but the key is that this relationship is freely defined by the business and the contractor.

How misusing contractors could harm your business

As businesses grow and develop, they necessarily need to become more complex and procedural. To manage this growing bureaucracy, businesses need dedicated, invested, and well integrated workers who prioritise its interests. Contractors, by definition, are not well suited to these roles.

Lack of institutional knowledge

Contractors often develop highly specialised skillsets, but they don’t tend to work for the same business for years on end. Even those who build long-term relationships generally won’t be integrated into the business to the same extent as a regular employee, and won’t have access to the same training and knowledge. As a result, they don’t develop the kind of institutional knowledge that employees do by operating in the same environment for years. This ultimately makes contractors and freelancers less versatile and less efficient in more generalised, ill-defined roles.

Flexibility goes both ways

Stable employment isn’t just for the benefit of the employee. The legal protections and benefits that employees enjoy are also powerful motivators to keep workers in their jobs. A contractor might simply terminate your contract if another client comes along with a better offer, a payment is late, or they simply don’t like working with you. The nature of the relationship doesn’t encourage or reward loyalty. As a result, your growing business’ supply of labour isn’t as reliable as that of a competitor who relies more on regular employees.

Intellectual property

Many jobs traditionally performed by freelancers are creative in nature, and this could lead to significant issues for your business. Inventions, content, or other creative work developed by employees typically belong to their employer. Contractors, on the other hand, retain their rights to any intellectual property they create unless they explicitly give it up. That means you can’t freely modify or reuse a contractor’s work in ways they didn’t intend, which can be very limiting. Further, it means that if a contractor comes up with a particularly clever innovation while working with you, you don’t automatically have the right to take advantage of it.

Contractors should be used responsibly

Employee relationships require more investment from both employers and their workers, and that investment serves to create stable and strong businesses. Contractors, on the other hand, are an excellent supplementary tool that allows businesses to operate more flexibly and on a broader scope than they would be able to otherwise. The same things that make contractors so useful in this respect also make them less appropriate for roles that are traditionally filled by regular employees.