What Is an Independent Contractor?Independent contractors work for themselves and earn their living from their own businesses rather than relying on another to provide them a salary. Independent contractors are also known as entrepreneurs, consultants, freelance workers, or self-employed.
What Are the Differences between Being an ¿Employee¿ and an ¿Independent Contractor?¿There are many federal and state laws that cover employees. Two of the most important are the Internal Revenue Code (IRC) and the Fair Labor Standards Act (FLSA). The employer must follow these laws by paying Social Security and Medicare, withholding income taxes, paying for unemployment insurance, paying at least the minimum wage and overtime wages. There are no such requirements for independent contractors. The independent contractor usually will earn higher wages, because the employer does not have to pay for all of these benefits. An independent contractor controls the payment of taxes. If an employer treats someone as an independent contractor when they should be treated as an employee, that employer risks substantial civil, and possibly criminal, penalties for violating labor laws. If you are a business owner, whether large or small, you should make sure you are classifying your employees correctly.
Am I an ¿Employee¿ or an ¿Independent Contractor?¿The issue that is considered in differentiating employees and independent contractors is that of ¿right to control.¿ If the employer controls not only what is done, but also how it is to be done, then the worker is deemed to be an employee and not an independent contractor. If the worker is more independent, it is more likely that they will be considered an independent contractor. Factors to consider:- Instruction given to worker
- Training provided to worker
- Set hours of work
- Compensation by the hour, week or month ¿ or by task
- Business/travel expenses paid by company
- Full-time work at one company, or working for several companies at a time
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