I have been self-employed and running my own consulting business since 2008. For a long time, I was also a sole-proprietor (technically, I still am). I was the only person in my business. I was the president, the consultant, the IT person, the accountant, and everything else.
Over time, I slowly built up my reputation and my business and about 2 years ago I started working with some subcontractors. I struggled at first to come up with a fair payment model, but finally opted for a revenue sharing model. They earn a majority percentage of what I charge our clients. Since they are not employees, I don't withhold taxes from their income (that is their responsibility), and I don't have to pay tax on the money that they earn either. I just pay tax on the percentage that I keep.
Overall it's been a good model for me - that way, I'm not paying out what I'm not earning. However it's a tough call and not everyone is comfortable working under that model. I always fulfill my obligations to my subcontractors however, and I make sure they get paid within 5-10 days after I do (it just depends on how long it takes the bank to send out the eBill Payment I set up).
If I switched to a model where I had employees, life would get a lot tougher because my income stream isn't steady, but employees have to be paid at a steady rate. That's the main reason why I may never have employees, and I'll just work with subcontractors.