Independent Contractors vs. Employees: 3 Key Things to Know
A worker is considered an employee if their relationship with the employer meets In fact, it is usually the methods of the independent contractor which bring the. As is true with any employment relationship you enter, it's important to understand the by an employer and engaging in an independent contractor relationship. Each type of relationship comes with its own advantages and disadvantages. Independent contractors (often referred to as “ employees”) are individuals compliance with workplace safety and employment anti-discrimination laws, etc.
Independent Contractors Are Engaged for a Specific Project or Time Period Unlike traditional employees whose jobs may encompass a wide variety of duties and tasks, independent contractors are only responsible for performing the services outlined in a contract or Scope of Work SOW. It should include details about the work to be done, a timeframe, a process for managing changes, and payment terms.
Independent Contractors Submit Invoices for Work Completed Rather than working for a specific salary, independent contractors submit invoices for their work.
Pay and payment terms should be discussed during initial contract negotiations. Independent contractors may have a standard billing rate for their services, or their rate may vary depending on the type of work you are looking for. Independent Contractors Determine When They Work Because independent contractors are their own business entity, a client cannot determine their work hours. They alone are responsible for fulfilling the work agreement—when they work and the hours they keep is completely up to them.
For example, independents should provide any needed tools or equipment.
Understanding Employee vs. Contractor Designation
If a project requires specialized equipment that is only available on site, this should be stipulated in a contract. If an independent contractor does need to work on site, ensure relevant company managers and employees are aware of processes and protocols so they do not treat the contractor like an employee.
Independents should be aware of their own tax responsibilities. Independent Contractors Are Not Eligible for Company Benefits There are many financial benefits to engaging independent contractors, including not having to provide traditional benefits such as health insurance, stock options, or retirement plans.
Nevertheless, it is good practice to ensure independent contractors have basic insurance requirements built into their contract to protect against any legal issues. Independent Contractors Can Subcontract or Delegate Work Independents may have their own employees, subcontractors, or partner consultants who help them to complete work tasks. During initial discussions, ask the independent contractor you are engaging if they utilize additional work resources.
Independent Contractors vs. Employees: 10 Differences You Need to Know | MBO Partners
If they do, this should be outlined in your contract along with any necessary details. Remember, if independents do engage extra resources, they alone are responsible for the tax responsibilities, and filing and reporting requirements for these workers.
Unreimbursed expenses, independent contractors are more likely to incur unreimbursed expenses than employees. Services available to the market. Independent contractors are generally free to seek out business opportunities. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time even when supplemented by a commission.
The type of relationship depends upon how the worker and business perceive their interaction with one another. Businesses generally do not grant these benefits to independent contractors.
An expectation that the relationship will continue indefinitely, rather than for a specific project or period, is generally seen as evidence that the intent was to create an employer-employee relationship.
Services provided which are a key activity of the business. The extent to which services performed by the worker are seen as a key aspect of the regular business of the company.
Consequences of Misclassifying an Employee Classifying an employee as an independent contractor with no reasonable basis for doing so makes employers liable for employment taxes. Certain employers that can provide a reasonable basis for not treating a worker as an employee may have the opportunity to avoid paying employment taxes.