Employee Vs Independent Contractor

A question I am often asked is: I need help, but I don’t know if I need an independent contractor or an employee.

It’s a tough question and not an easy one to answer without digging into your business. I would like to give you some food for thought so that you can think on the right path.

First, the reason you care is because if you treat someone as an independent contractor, yet the IRS or DOL views them as an employee, you will be subject to fines, penalties, and back taxes. OH! Consider these questions before deciding.

Is the project based on work? If you have a project or “to-do” item that you can deliver and are only concerned with the outcome and not how it’s done, get a contractor.

Does the person need to be in your office to complete work at certain times? If you’re telling someone when and where you’ll be working, you need an employee.

Do you care when one person does the job? If you’re only concerned with the work being done, regardless of whether it’s at 8 am or 8 pm, as long as it’s done by a certain date, get a contractor.

Is it ok if you have other customers? If they can work for you and others at the same time, get a contractor.

My favorite resource for this is the IRS. This PDF publication does a great job of getting you thinking in the right direction. You can find it by searching the IRS website.

What has been your experience with employee vs. independent contractor?