What’s the Difference Between a Contract Worker VS Employee?
What’s the Difference Between a Contract Worker VS Employee?
Thanks to technology-based jobs like ride-sharing, food delivery services and free-lance “work from home” opportunities”, there are perhaps more contract workers in the marketplace than ever before. Contract workers tend to have the ability to better control their own schedule and accept or decline jobs of their choice. But the difference between contract worker and an employer goes deeper than that. Technically, each is a job designation of the Internal Revenue Service, and many of the differences are in how income taxes are tracked and paid. Here is a closer look at contract workers vs employees.
Tax Differences
Since they are not an employee, contract workers are not subject to have taxes withheld like FICA, State and Federal income taxes. On the other hand employees are subject to such deductions. Keep in mind, this does not mean contract workers are not subject to these taxes. It is just that they are responsible for ensuring they are paid as opposed to their employer.
Autonomy
A big advantage for independent contractors is the autonomy they hold in their work. While an employee serves more at the direction of his or her employer, a contractor has more options to choose projects, hours worked, etc. Some would say independent contractors are given an opportunity to work while employees are given a job.
Training & Benefits
While employees are frequently trained in the policies and procedures of their employers, independent contract workers are expected to already have certain competencies. As long as they perform to expectations, their position is usually secure. Employees generally will receive more benefits like healthcare, vacation time, etc. than contract workers.
How and Where Work is Performed
Many employees perform their duties at the place of business of the employer, using their tools and equipment. Independent contractors often perform work at a neutral site or their own home, using their own tools or equipment.
Independent contractors can be less cumbersome for employers, and since they are not responsible for taxes, less expensive. Employers, however, do lose some control over contract employees. From the worker standpoint, being an independent contractor offers more freedom and even the opportunity to perform work for multiple companies. Independent contractors can work as much or as little as they prefer and in many cases can even set their own hours.
Before deciding whether a worker should be an employee or contract worker, businesses should consult an accountant or lawyer to make sure they are in compliance with IRS guidelines.
If you have a small business, protecting it is just part of your job. We can help. We offer a range of small business insurance plans for a range of companies. Contact us to discuss your risks and how they can be minimized.
Do you have questions about your insurance? Find an insurance agent near you with our Agent Finder
Search All Blogs
Search All Blogs
Read More Blogs
The Wanderer’s Playbook: The Art of Traveling on a Budget
A practical guide to finding and saving money on travel adventures.
The Entrepreneur’s Toolkit: From Startup to Success, Insuring Every Step of the Journey
A phase-by-phase guide for entrepreneurs on the essential business insurance policies they need.
Beyond a Payout: How Life Insurance is a Living Financial Tool
A guide to how life insurance can be a living financial tool, with a focus on its cash value component.
The Driver’s Playbook: How to Maximize Your Auto Insurance Benefits
A playbook for drivers, revealing key policy benefits and strategies to get the most from your auto insurance.
Beyond the Big House: Uncovering the Hidden Value in Home Insurance
A deep dive into the valuable but often overlooked components of a home insurance policy.
The Thrill of the Grill: A Masterclass in BBQ Perfection
An ultimate guide to mastering grilling and barbecue, with tips, techniques, and delicious recipes.
The Entrepreneur’s Armor: A Guide to Protecting Your Business
A crucial guide to business insurance, covering essential policies and strategies for entrepreneurs.
The Gift of Security: A Simple Guide to Life Insurance
An easy-to-understand guide to life insurance, explaining policy types and a simple way to calculate your needs.
Hitting the Road Safely: Understanding Your Auto Insurance Policy
A simple guide to auto insurance, explaining coverage, premiums, and tips for finding the best policy.
The Homeowner’s Handbook: Protecting Your Property and Peace of Mind
A clear guide to home insurance, covering policy types, inventory tips, and how to save money.