Employee Versus Independent Contractor: An Important Question

Employee versus independent contractor!  It’s a critical question that can cost you thousands if your wrong!

Of course, there are advantages to both depending on your perspective. The IRS definitely will point out to you whether you have categorized them correctly or not.

Without trying to over simplify it too much the most important question to ask is whether you control someone’s work or not!

easy way versus hard way

Employee Versus Independent Contractor: Which One Did You Hire?

If I tell you I want a porch built on my house and provide you with an outline of what I want the finished product to look like and then pay you when it is finish the person building it would be considered an independent contractor versus an employee.

On the other hand if you begin to control the process by hiring the person to build the porch but you determine where they must purchase the materials, how much they should pay for them along with an account to charge them to, provide the blue prints, tell them what tools to use, and when to take breaks, it becomes obvious that they are an employee versus independent contractor.

So back to my original statement in that the more you control the work the more they are probably going to be classified an employee.

Employers like the idea of classifying someone as an independent contractor to avoid many costs associated with having them as an employee. Some of those expenses are workers compensation insurance, unemployment insurance, employee taxes, the potential of employee law suits, employee benefits, etc.

My advice to any employer trying to decide if someone is an employee versus an independent contractor is to error on the side of employee or to contact a professional organization like an employment attorney to confirm. 

Let’s go over a couple more examples to try and give you a better feel for the difference.

Remember having control of more than the outcome is the key.

Let’s talk about another trade that is often considered to be an independent contractor versus an employee and that is an Accountant.

Let’s say you hire a private accountant to take care of all your accounting. Once a day you provide that accountant all your daily receipts. Your expectations of that accountant are to track your expenses and report them to you on some type of regular basis. In addition, you expect them to prepare and issue all your payroll checks to your employees, pay all invoices, track all your debits and credits, and all other normal accounting functions. The Accountant works out of their own office and does work for other business as well. This would clearly be considered an independent contractor.

So, what could change the above example into an employee versus independent contractor?

  • If you did not allow them to perform accounting duties for anyone else.
  • If you required them to work out of your facility and controlled their hours of work.
  • If you required them to use your equipment to perform the work.
  • If you controlled specifically when they could come or go from your facility while performing the work.

The bottom line is that you shouldn’t try and complicate it. The key word is control!

Thank you for reviewing this information on an employee versus independent contractor.

Thank you and May GOD Bless You!