The Differences Between an Employee and an Independent Contractor

Did you know that 15% of workers are freelance contractors?

Have you ever wondered what separates an employee from an independent contractor? Or when it’s applicable to hire either one? If we’re being honest, labor laws can be tricky to navigate.

These distinctions are no different. Though, we’re here to help. Keep reading to see how to navigate these distinctions and which one is right for your business.

Job Requirements 

An employee and an independent contractor have vastly differing job requirements. An employer hires an employee and is typically subject to the employer’s orders. 

They typically work on-site for a certain number of hours with benefits. They are wholly reliant on the employer and the wages that they provide.

An independent contractor is a freelancer who works independently. They are not subject to the same orders or specific number of hours as an employee. They are usually hired on a contract-free basis for a particular job.

Work Benefits 

The organization typically provides employees with benefits. This includes health insurance, vacation time, and advanced leave.

They also receive the right to overtime and holidays. Employers are also required to provide their employees with several workplace safety regulations.

Independent contractors do not typically receive similar benefits and protections. They also often lack legal protections found in employee-employer relationships. To have work benefits and legal protection, discover CRM Lien Services here.

Payment Structures

An employee receives a regular salary or wage for their services. An independent general contractor is paid for each contract or job. Employees are typically paid an hourly rate or a fixed salary. Contracts may involve payment for specific tasks or a specific length of time.

Employees usually pay taxes directly through payroll deductions. They receive other benefits and protections from their employer. An independent contractor usually pays taxes directly to the government. An independent contractor typically has more control over how and when they get paid. This depends on the type of agreement they have with the company.

Employment Laws and Regulations

The differences between an employee and an independent contractor regarding employment laws and regulations are more than just the method of how the worker is paid.

An employee is covered by numerous federal labor laws. This includes wage and hour laws, overtime rules, rights to family and medical leave, equal opportunities, and so on.

These labor laws do not cover independent contractors who have self-employed services. This means they must have their insurance and negotiate for hourly pay or benefits.

They are also not eligible for unemployment compensation or workers’ compensation benefits, as these are generally only available to employees.

Knowing How Independent Contractor Works

Knowing the differences between an employee and an independent contractor is beneficial. It puts both parties a better understanding of the roles and responsibilities. When in doubt about whether someone is an employee or an independent contractor, understanding the differences, such as their control over work hours and the extent of employer oversight, can help.

Seek help from a legal expert to ensure you make the best decision. Visit our website and read more great content.