Independent contractors offer flexibility and specialized expertise, but the savings come with trade-offs.

After more than two decades of working with independent contractors, I still believe they’re one of the best ways to run a flexible small business. But I’ve also learned that they’re not nearly as cheap, simple or risk-free as many business owners assume.

There are plenty of advantages. I can hire contractors for specific projects without making a long-term employment commitment. I don’t have to provide employee benefits, paid vacation or other traditional employment perks. I can negotiate project rates, define deliverables and avoid worrying about keeping someone busy when the work dries up. Contractors generally manage their own schedules, tools and methods.

It can be a flexible and cost-effective model. But it’s not all rosy.

Here are seven things I’ve learned about working with independent contractors — and what every business owner should consider before building a business around them.

When you hire a contractor instead of an employee, you may save money on payroll taxes, benefits and other employment-related expenses. But contractors have their own business expenses, and those costs have to be covered somehow. That’s why their hourly rates are often higher than what you’d pay an employee doing comparable work.

Their rates can also change as market conditions shift, making long-term costs less predictable.

This may still be a financially sound decision for your company, but I recommend projecting the total cost of hiring a contractor versus an employee for every position you consider.

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