Independent Contractor vs Employee

From United Benefit Advisors — “Not correctly classifying an individual as an employee can lead to an employer being required to pay taxes, such as unemployment tax, that would have been required of the employer if the individual had been correctly classified. The organization may also be held liable for overtime pay, resulting in a costly expense for the organization. In certain situations, the issue can escalate leading to civil lawsuits against the employer.

How do I know how to classify individuals?

Generally, an individual is an independent contractor if the employer controls only the final result of the work and not when, where and how it will be done. Therefore, employers cannot demand that independent contractors work a “9-5” schedule in their office. If the person is an independent contractor, they are free to perform the work on a beach at 4 a.m., as long as they produce the services for which they were hired.

An individual may also be classified as an employee if the company provides the majority of the equipment used to perform the services. Independent contractors will generally work with their own equipment and are unlikely to be reimbursed for any equipment purchases required to perform the job.

Some others factors to take into consideration are the time period of hire and whether the individual provides services that are integral to the business. If an individual has been hired on an indefinite basis, versus for a specific project or time period, and/or provides key services, then the employee may be classified as an employee….”

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