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Employee or Independent Contractor?

Are You an Employee or an Independent Contractor?


Employee or Independent Contractor?

Employee or Independent Contractor?

Copyright Tara Minchin
Given the changes in the job market and the decrease in the number of employers hiring full time workers, it's important to know what your rights are if a company offers you a position as an indepedent contractor rather than hiring you as an employee. If you're an independent contractor you are working for yourself and the company is your client. You are responsible for paying your own employment taxes and are you not entitled to company provided or government mandated employee benefits.

When You're an Employee

A worker is considered an employee if the employer controls what work will be done and how it will be done. What is important is that the company has the right to control and manage the details of how and when the work is performed.

Employees are on the company payroll, and the employer withholds federal and state taxes, Social Security, and Medicare. Employees are provided with unemployment and workers' compensation insurance. Employees may be offered benefits like paid sick leave, vacation, health insurance, or 401(k) or other retirement plan participation.

When You're an Independent Contractor

The general rule that determines whether someone is an employee or an independent contractor is that an individual is an independent contractor if they decide how the work will be done. Independent contractors aren't told by the company what to do and how to do it. What is important is the end result and how it's reached is up to the contractor.

Independent contractors typically set their own hours and are paid on a freelance basis, either a flat rate or per job rate. Independent contractors are reponsible for paying their own taxes to the IRS and to their state tax department. Independent contractors are not entitled to benefits, even those mandated by law like unemployment and worker's compensation, because they are not employees of a company.

IRS Employee or Independent Contractor Rules:

  • Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  • Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  • Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

The private web sites, and the information linked to both on and from this site, are opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance, or assistance from State, Federal, or International governmental resources to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only.

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