Anyone who decides to start their own small business will have various responsibilities to take on since they will be considered the boss. Along with figuring out how many employees to hire and what their roles will be, they will also have to figure out what type of employees they will have working for them. In many cases, businesses will choose to hire employees and independent contractors. With inde
pendent contractors and employees being considered two different types of classifications, before an employer can determine what a person will be considered, they will want to ensure that they know the difference between the two and what things can be looked at to help them determine this classification.
Below, you can find information about independent contractors, employees and what can help an employer determine a person's classification.
What should employers look at to help them determine a person's classification?
When an employer has decided to hire someone to perform work for them, they typically will look at several aspects including behavioral, financial and the type of relationship that will allow them to classify the person's type of employment. Asking questions about these three areas will help them determine what type of employee a person is, but also how they are to be paid. For example, when an employer looks at how much control they have over the worker's job duties and how they perform them, how the employee is paid or if there is a written contract or benefits that the employee has access to. Depending on the answers to these questions, they could be considered an independent contractor.
What is an independent contractor?
An independent contractor is someone who performs specific job duties for a company or business, but is not under the complete control of the person who hired them or their authority. When paid, they are also not subject to having taxes withheld from them. In fact, they are responsible for paying taxes themselves. Many independent contractors are also not able to receive any type of benefits, such as paid vacation sick leave or health insurance.
What is an employee?
An employee is someone who works for a person and their job duties are under control of their employer. Unlike an independent contractor, this person is paid through their employees payroll and when they are paid, Federal and State taxes are likely taken out of their check. They are also able to receive paid vacation, health insurance and other benefits.
In many cases when a person is an independent contractor or an employee, this is something the employer will inform them of when they have first been hired for a job. If they are not sure, they can also examine how they are being paid, if they are able to receive benefits, and if taxes are being withheld from their pay. However it is important for employers to classify employees and make sure they are withholding taxes from the appropriate people if they want to avoid penalties and fees for not doing so.