To Hire or Not to Hire: Independent Contractors Versus Employees

To Hire or Not to Hire: Independent Contractors Versus Employees

 

 

Most of the time, hiring an independent contractor for your business is a means of providing a temporary subject matter expert who can provide some measure of unique support.  While some businesses do continue to retain employees of this type that have provided vast contributions to an organization this is not usually the case.  In fact, there are certain dangers in retaining a subcontractors in any lengthy or meaningful way as it can then cross the lines that the Internal Revenue Service and Bureau of Labor have set down to protect worker’s rights.

Differences Between Employees and independent Contractors

How the government defines employees and independent contractors may be differently than your organization, so it is important to note the legal differences.  Employees are individuals who have been hired as full or part-time “employees” of the company that they are working for.  They are subject to specific taxation as an employee, with payroll taxes taken out by the company, and those benefits agreed on when they were hired.  Depending upon state laws, subject to “right to work” exclusions, they are entitled to overtime and certain unemployment obligations.  A contractor is his or her own company and instead of being paid as an individual, the company receives payment.  A contractor has a separate business checking account, is paid hourly, and does not receive benefits from the company he or she is contracted to, and receives no several or unemployment benefits when the contract ends.

Employees

• Hired by the firm as a full or part-time “employee.”
• Paid using w-2 with all taxes taken out
• Benefits per agreement and all federal and state laws in regards to heath insurance & unemployment insurance

Contractor

• Hired by the firm as a business (or through a business in the case of a temp agency)
• Paid as a 1040 form, pays their own taxes
• Receives no benefits from the company, provides their own health and unemployment insurance

Trouble Areas

If, however, a contractor is treated as an employee with expectations that resemble those of employees it is possible that he or she may be entitled to benefits, such as overtime, healthcare, etc.  That is why it is very important to consult with an attorney to draw up subcontract agreements prior to engaging independent contractors so that both parties are able to benefit from what is usually an advantageous cooperation between two firms.

For more information about hiring consultants or business contracts, feel free to give us a call today to 305-921-0440.  We can help you figure out the best means of engaging independent contractors and protecting your business.

 

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