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The exact definition of a full-time employee (FTE) can vary, but someone who works at least 30 hours per work or 130 hours per month generally qualifies. 

For startups, choosing to hire FTEs, particularly the first employees, is an important step. You’ll need to make sure you’re in a financial position to cover all the associated costs and that there’s enough work for the role.

FTEs may make a salary, bonus, and receive stock options. But you also need to consider the additional expenses for benefits, payroll taxes, insurance, training, and any perks that you want to offer. Generally, a company spends about 1.25 to 1.4 times an FTE’s salary to keep the person employed.

You may want to hire independent contractors for specific projects or when it doesn’t make sense to bring on an FTE. While their hourly wage may be higher, companies might save money overall because they don’t need to pay for contractors’ payroll taxes, insurance, and benefits. 

However, state and federal laws can impact whether you can hire someone as a contractor or need to hire an employee instead. It may be wise to speak with an employment attorney to determine when someone should be classified as an employee.