With the freelance economy booming in recent years, there have been some concerns about how workers are classified. Is a person an employee or independent contractor?
An independent contractor is a person who performs services for another person or business. They have a contract in place that clearly defines the contractor’s duties, pay, and type of work, and the amount of work. The focus is on getting the work completed. Many employers hire independent contractors for temporary work.
Many employers think they can simply hire workers as independent contractors and avoid paying taxes, workers’ compensation insurance, vacation pay, and other benefits. This is not the case at all, and the truth is that misclassification is no minor issue.
Misclassification can affect employers and employees alike. Employers can face wage law violations, fines, tax trouble, and penalties for not paying for unemployment insurance and workers’ compensation. Workers lose out as well, since they do not get the benefits they rightfully deserve. They are not given vacation pay, medical benefits, paid leave, retirement plans, unemployment benefits, and other benefits given to employees.
Because of the possible penalties, it’s important for employers to know the difference between employees and independent contractors. It’s also important for workers to know their rights as well so they can get the pay and benefits they deserve for the work that they do.
Difference Between Employee and Independent Contractor
So how can a business tell if the person they are hiring should be classified as an employee or independent contractor? Here are some ways to tell:
- Who they work for. An employee works for a business, while an independent contractor runs their own business and ultimately works for themselves.
- How they are paid. Employees are paid by the hour, with a salary, or a piece rate. Independent contractors, on the other hand, are paid by the job.
- Material use. Employees use their employers’ materials, while independent contractors buy and use their own to complete a job.
- An employee has a continuing relationship with the employer. They continue working with them until one party terminates the relationship. An independent contractor is hired on a temporary basis. They will only work until the project is done.
- An employer will have processes in place and employees must follow them in order to complete tasks. Independent contractors follow their own processes to get work done.
- An employee will typically work the same hours and schedule every day. Independent contractors, on the other hand, have the flexibility to work whenever they want, wherever they want, as long as they get the job done.
Contact a Business Litigation Lawyer Today
As a business owner, you need to ensure that your employees are classified properly. Otherwise, you could face violations that will result in fines, tax issues, and more.
Count on a Bradenton business litigation lawyer from Cahall Law Firm to help you with all the issues your business may face. To schedule a free consultation, call (941) 281-2019 or fill out the online form.