Should a worker be treated and paid like a company’s employee, or like an “independent contractor?” As the economy changes, this is becoming a significant issue under federal and state law. When a company classifies a worker as an independent contractor, that worker becomes responsible for paying additional payroll taxes and fees that employees do not face, and the worker loses benefits that employees receive. But only certain types of workers can legally be classified as independent contractors. Misclassifications can cost companies substantial fees and penalties, including I.R.S penalties, which may be even greater under California law.
Outsourcing work to independent contractors is becoming increasingly popular, especially when it comes to completing short-term or episodic projects. In many cases, this saves the employer time and money, and it is a great way for workers to “freelance” and seek gainful employment in less conventional ways. However, this relationship must be properly defined and agreed upon by both sides, or you may end up in a costly dispute.
What’s the Difference Between an Employee and an Independent Contractor?
It is important to understand the differences between an employee and an independent contractor, so you have the information to decide which is best for your needs. If you are considering hiring an independent contractor for any type of work, either short-term or long-term, contact Janovsky & Associates today. Attorney Janovsky can help you draft an independent contractor agreement that is tailored to the needs of your business and the specific professional relationship you are entering with the worker.
While it is true that both employees and independent contractors perform the same type of work in many cases, the details of the partnership are quite different. Independent contractors are usually hired on a job-to-job basis or for long-term work that can vary from project to project. These workers are outside the company’s control, meaning they set their own schedule, use their own equipment, and work independently from the business entirely. Contractors are essentially self-employed. Employees, on the other hand, are hired by a company and are contractually obligated to function under company rules and policies. These individuals may be offered benefits, usually work in an office setting, and are provided the tools and equipment necessary to perform the duties outlined by the job.
Perhaps the biggest distinction between an independent contractor and an employee is what taxes are paid and when. Contractors do not have taxes deducted from their paychecks; rather, they must pay self-employment taxes when filing their taxes, or setup quarterly payments.
If you need advice about whether a worker is an independent contractor or an employee, contact Attorney Janovsky for a consultation. She will answer any questions you may have, and will help you determine which type of worker is best for your needs.
Legal Disclaimer: The information provided on this website is not legal advice, and does not establish an attorney-client relationship. The information is provided for informational purposes only.