Employee or Independent Contractor?

One typical conversation I have with employers is about the confusing question of who is considered an employee and who is considered an independent contractor. While some situations can have gray areas, let’s take a look at the basics of who is who.

If a person is on your payroll and receives a regular paycheck, then that person is an employee, not an independent contractor- who likely receives payment in a different manner. Other factors that would identify someone as an independent contractor are:

· If the worker supplies his/her own equipment, materials and tools

· If the worker controls his/her own hours of employment

· Whether the worker can choose not to come to work without fear of losing his job

· Whether the work is temporary or permanent

Typically, the type of the work will help distinguish between the two. When the worker’s job is considered vital to the business, it is more likely that he/she is an employee. On the other hand, if the worker’s job is temporary and unnecessary, he/she may be an independent contractor.

So what does this mean to an employer from a tax standpoint? If the worker is an employee, you must pay state and federal unemployment tax, social security tax and workers compensation/disability premiums to a State Insurance Fund. If he/she is an independent contractor, then you are not required to make any of these payments.

Employee Leasing Quotes was created to help business owners choose an employee leasing company that fits their unique needs. Please call if you’re interested in seeing what advantages an employee leasing company could do for your business. We can be reached by calling 1-888-582-8388 between the hours of 8:30-5:30 EST.