Employee or Contractor: Who Cares?

Employers, you certainly care.  If you misclassify a worker as a “contractor” when he/she is an employee, you can be subject to substantial penalties, taxes, or overtime pay.  You may prefer having contractors do the work because it can save money.  But you give up control of the details of how the contractors perform their duties.

Employees, you care, too.  On one hand, an employee has employment benefits that contractors do not have, such as workers compensation coverage, social security contributions by your employer, and most times health insurance.  On the other hand, as a contractor you can come and go as you please and run your business as you want, without having to heed specific instructions by any boss.

The key difference between “employees” and “contractors”:  An employer has control over the details of an employee’s daily work duties.  The contractor must give only periodic reports of the status of his/her work and ultimately deliver a final result requested by the employer.  There are a number of other factors in the legal definition of “employee,” although this is the primary difference.

Both employers and employees should be aware of the difference between an “employee” and a “contractor.”

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