Independent Contractors vs Employees: The Differences

May 18 2022 - The business world is in an accelerated state of change. Did you know that approximately one in 10 workers is an independent contractor?

Many businesses are going through a tough decision-making process. They're thinking about whether to hire independent contractors vs employees.

Does that sound like your business?

The role of a contract employee is very different from that of an independent contractor. Contract work can be designed to suit the business's needs in the right situation.

In this article, we will walk you through everything you need to know about contractors and employees. We'll talk about whether to hire a professional working as a contractor or to sign them on as an employee.

What Is an Independent Contractor?

Independent contractors work as individuals as their own business. They perform specialized services with a temporary contracted understanding.

All of the terms of payment, responsibilities, and type of work are clearly defined in a contract. It explains what the type of work is. It doesn't always state exactly how the worker should complete it.

In this way, an independent contractor can perform the task in their own way, which is slightly different from a regular employee. Employees may have their tasks specifically designated by a higher-level manager.

Independent contractors are self-employed. They can operate independently and often work for more than one client at one time.

Many independent contractors recognize that companies will hire them for short-term periods. These companies need specialized services. They want to avoid bringing on employees to their staff for the longer term.

The bottom line is that independent contractors are typically short-term project based workers. They have some degree of autonomy in achieving a well-defined goal.

What Is the Difference Between an Independent Contractor and Employee?

Employees function slightly differently. Employees are under a more specific contract from an employer. The employer will define specifically how employees do the work.

The earnings that an employee makes are usually not subject to self-employment tax. This is something that an independent contractor will need to self-manage over the course of the year.

The employer has a legal right to determine how the employee achieves their responsibilities. This is once again different from an independent contractor. If you have a specific project that needs to be completed, an employee will give you more control over how the project gets done.

If you are reading this, and you are interested in freelancing in 2022, check out this freelancing guide here.

Choosing Independent Contractors Vs. Employees

At the end of the day, choosing independent contractors vs employees is a personal decision that every business needs to make. Independent contractors will usually cost less but also provide less specificity and control over the job. Both can benefit a business in the right circumstance.

If you enjoyed this article about contract work in everyday business, please check out the other articles on our website!

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