Are You an Independent Contractor or an Employee?

There are many differences between an independent contractor and an employee, but not all of them are easy to understand or recognize at first glance. It’s important you are clear as to which type of hire you are to a company. Everything from your pay and taxes to your place of work are affected by these classifications.

As you’ll see, each category has pros and cons. It really comes down to understanding the differences between the two; then making the most of your situation.

Key Traits of an Independent Contractor

  • Also known as a contract worker or self-employed
  • Usually supplies consulting services to more than one company
  • May set their own hours
  • Does not receive benefits from employer (401(k), vacation/sick days, healthcare coverage, etc.)
  • Incurs costs associated with job training or performance
  • Not subject to tax or FICA withholdings, but will still have to pay self-employment tax
  • Not eligible for unemployment or workers’ compensation
  • Paid according to terms of contract that usually will not increase for any reason, nor can it decrease
  • Not protected by workplace safety and anti-discrimination laws

Key Traits of an Employee

  • Usually works for only one employer
  • Works the hours set by employer
  • Often received employment benefits (401(k), vacation/sick days, healthcare coverage, etc.)
  • Does not have to cover costs associated with job training
  • Receives net salary, after employer has withheld income tax, social security and Medicare taxes
  • Eligible (most likely) for unemployment and workers’ compensation
  • Covered by state wage and hour laws
  • Protection of workplace safety and anti-discrimination laws

What Works for You

There are clearly great differences between an independent contractor and an employee. Each type of worker has benefits to them and also risks associated with them. To determine which type of position you want, you have to consider how you want to structure your career path. For help determining which route to take, talk with the representatives at Principle Personnel. They can help you make that important decision, plus find the jobs that will help you achieve your professional goals.

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