What Is the Difference Between an Employee and an Independent Contractor?

A Business FAQ with Mark A. Williams.

An employee is somebody that you pay wages to, you withhold taxes from them, and you provide them benefits. An independent contractor is one where you pay them a set amount of money and they have to withhold their own wages.

In a business, it is important to be able to recognize when can I pay someone as an employee versus when can I pay them as an independent contractor. There are a lot of different tests depending on certain questions:

  • Do I have to provide workers comp?
  • Do I have to pay unemployment?
  • Do I have to withhold taxes from them?

Generally, I say to people that if you control what they do and tell them you have to be in my office and use my computer, you have to be here at 8 o’clock, you have to leave at noon, that sounds like an employee. And generally if you say to them, “Go get this done sometime over the next couple of weeks,” that sounds like an independent contractor. But really, you have to look at the facts and circumstances to make that determination every time.

© 2014 Parsonage Vandenack Williams LLC

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