What’s the Difference Between an Employee and ?

One of the most difficult things about running your own business is finding good employees. Particularly during busy seasons for your business, you may find yourself considering turning to temporary employees or independent contractors to meet the needs of your business. It is important that you know the differences between employees and independent contractors as well as the risks and benefits of each method of filling your employment needs.

Independent Contractors

Generally speaking, an independent contractor is someone you pay to complete work but who is not a permanent employee. According to the IRS definition, you must have control only over the end result of the contractor’s work, not over precisely what they do or how the work is completed. Many employees are incorrectly classified as independent contractors, due to the employer’s degree of control over the work. A construction worker may be an independent contractor, for instance, if you control only what he or she is meant to build and when that work must be completed. However, if you set hours, dictate materials and methods, or otherwise exert more control over that construction worker, then he or she becomes an employee.

Pay & Benefits

Independent contractors are not, strictly speaking, your employees. You are not responsible for providing health care, paying in or withholding taxes, or providing any other benefits to the contractor. You are not even required, necessarily, to pay minimum wage, though it is likely that the independent contractor’s rate will be at least minimum wage. This reduced responsibility and cost can make using independent contractors extremely attractive. However, you will be held to the terms of the contract governing the work relationship, which can include rate of pay, work deadlines, required work conditions, and more.

Traditional employees, on the other hand, must be paid minimum wage and overtime. You are also required to hold out and pay in taxes on behalf of your employees. Although you are not required to provide health insurance, paid time off, or other such benefits, traditional employees have come to expect these benefits. You may find that, in order to attract quality workers, you need to offer these benefits.

Control

As a business owner, you will want to have a degree of control over the work your employees or contractors complete. If you have traditional employees, you will be able to control both how the work is completed and the end results of that work. However, independent contractors can be held responsible only for the end results of their work, so you may find that you are unhappy with their process or methods. Unless their actions violate your contract, you will have to recourse other than to simply refuse to hire the contractor for any additional work.

Contact Your Attorney

Tampa business transaction & formation attorney David Toback can help you to determine the best option for your business. Whether an employee can be treated as an independent contractor or not can be tricky, as can crafting acceptable independent contracts, so do not navigate these issues alone.

Resources:

http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0400-0499/0448/Sections/0448.110.html

https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined