a man mixing a glass of juice

The Difference between an Independent Contractor and an Employee

Share on facebook
Share on twitter
Share on linkedin

When one is running a business, it is important that they understand various distinctions between employees. In this case, we are going to be specifically examining independent contractors and how they differ from regular employees.

The Difference between an Independent Contractor and an Employee

There are certainly a lot of similarities between independent contractors and employees, but there are key details that you need to be aware of so that you know how to handle them.

What Is the Difference Between an Independent Contractor and an Employee?

Businesses can pay independent contractors and employees the same amount for the same kind of work, but a big difference between the two of them comes down to how they are handled under the law.

A big difference between employers and independent contractors is how certain financial things are handled; for example, when it comes to employees, the employer removes the income tax, Social Se

However, this is not done with independent contractors. Indeed, independent contractors do not have to be covered in this way. Not only that but they are not covered under labor or employment laws like employees are.

Employees Are Typically Full-Time Workers Who Are Beholden to a Single Employer

(at least in the case of that specific job), while full-time workers have more control over the nature of their employment.

It is important to understand the distinction between these two, not just for the above-mentioned reasons, but you also have to be able to understand how much authority you have over them, what you can task them with, as well as other factors.

For example, you need to be able to understand how much authority you have over the actions and behavior of your independent contractors compared to your employees.

One of the disadvantages of an independent contractor is that you have to accept that you have less control over their actions and must act accordingly with that fact.

Join Our Small Business Community

Get the latest news, resources and tips to help you and your small business succeed.

Granted, once you have established a contract, the independent contractor is expected to follow it much the same as your regular employees are expected to follow their own labor laws.

Nevertheless, independent contractors do still have the freedom to decide that they do not want to work in the way you want them to, and you have to decide whether or not you are happy with that, or if you want to renegotiate the contract or even turn them down entirely.

As independent contractors become more and more common in basically all industries, you need to be able to respond to that growth. Not only by making efforts to accommodate their wants and needs but also by making sure you understand the distinction so that you do not run afoul of worker classification.

If you are not careful about this, you could see yourself facing fines, penalties, audits, and more, so be very careful about that. Unlike employees, you need to understand that independent contractors are, well, independent.

They may even have their own incorporated business, so the last thing you should do is consider them in the same way you treat your employee. Not that you should treat your employees poorly, but the employee-employer relationship invariably involves someone who answers to another person.

While an independent contractor still has to provide you answers, your best bet when working with them is to act as though you are dealing with another business. It will make things go a lot more smoothly and make it a lot more likely that this independent contractor will want to work with you further in the future.

This could create trouble for you as well, both in that poor treatment of an independent contractor could get out, as well as getting in trouble for treating an independent contractor as though they are an employee.

Advantage of Having the Services of an Independent Contractor

A big advantage of having the services of an independent contractor on your side is that, unlike a newly hired employee, an independent contractor is coming to you with all of the necessary skills for the job that you need to do.

This means less time getting them ready, as well as less money spent in the process This does come with drawbacks, such as the fact that you are likely going to have to pay more money than if you were to hire an employee, but depending on the situation, it may be the best choice for you in the end.

You also do not have to worry about covering an independent contractor’s benefits like you would an employee, such as health insurance, stock options, and retirement plans. Makes it that much less of a headache working with them, that’s for sure.

Another drawback is the fact that you only have so much control over their actions as far as the work they do. Due to the fact that they run their own business, you need to be able to accept the fact they can and must be able to keep doing other work with other businesses.

Granted, you can perhaps negotiate some kind of exclusivity, but that will likely cost you a whole lot more money in the grand scheme of things. Job duties of an independent contractor also differ from employees, as the only work that they are expected to do is the work that you negotiated with them for them to do.

So be sure to not try to enforce a larger scope of work on them than is reasonable or expected. Speaking of, you have to make sure that your scope of work for the independent contractor is exactly what you want it to be, or at least as much as you can convince the independent contractor to do.

If you expect more than you ask of them, you are liable to be disappointed with the results.

Payment may also be handled differently as well. In the event that you establish a long-term contract with someone, they may be inclined to ask for a similar payment structure to an employee, but in a lot of cases, they may ask for money upfront, or upon completion (the latter is definitely to the benefit of you more than them).

You also are not responsible for determining how long they work, and when they do. Because they are their own business entity, they are the ones who determine when, where, and how they do their job. So long as it does not result in the product and/or service being delayed, or worse, of poor quality, you do not have much in the way to gripe about.

Conclusion

Even with all this information, there are a lot of complications to do with employees versus independent contractors that may go over your head, and one of the best ways to figure all of that out is to get in touch with people that can help keep you abreast of the kind of stuff you have to keep an eye out for.

You can consult the experts at the Feldman Legal Group in order to make sure that whenever you work with an independent contractor, you don’t have to worry about making any mistakes with how you handle things.

__________________________________________________

Some other articles you might find of interest:

Marketing blogs you must follow as an entrepreneur:

29 Marketing Blogs Every Small Business Must Follow

Are you feeling cramped in your home office space? You might enjoy this article:

Home Office Design Ideas for Small Spaces

 

Join Our Small Business Community

Get the latest news, resources and tips to help you and your small business succeed.

RECENT POST