Employees and contractors often work side-by-side at the same company, even doing the same or similar work. That’s why we usually see some misclassifications and owners having trouble deciding what is best for their business.
However, there are very important legal differences between the two, going way beyond the job title.
Employment status affects employment benefits, tax implications, liability, etc. so it is really important you’re aware of the differences between employees and contractors before hiring.
In this article, we’ll provide briefly some clarity to help you decide what is best for your business.
What is an employee?
An employee also called a worker, is a person who works part-time or full-time in the service of another person under a contract of employment, whether oral or written, express or implied, and has recognized rights and duties.
When you hire an employee, you have complete control to direct that person’s work, to train the person in the way you want the job done, and to require that person to work only for you.
However, you need to be aware of employment laws and regulations and be compliant with all of them, such as salaries, taxes and work rules.
What is an independent contractor?
An independent contractor, also known as a freelancer, is a person contracted to perform work for another entity as a nonemployee.
You can assign duties to an independent contractor and impose a deadline and work guidelines, but you cannot tell that person how to get the job done. Moreover, an independent contractor can work for others, can set his or her hours of work, and even provide his/her own tools.
On the other hand, you have a few reporting or tax responsibilities for independent contractors.
Employees and contractors: which do you need?
In this regard, you should consider hiring an employee if:
- The work needs to be done under your supervision
- You want to control the hours of work and the tools and equipment used by the worker
- If this is a long-term need
- If this work is essential to your business and not a peripheral job.
And you should consider hiring a contractor if:
- The work is not central to your business; for example, running your computer system is outside the scope of your business mission.
- The work can be done by a professional who doesn’t need much supervision
- The work is a short-term project that will be completed in a defined period of time
Misclassification can result in legal issues and can hurt your business. Think carefully about what you are looking for.
If you need legal advice or need a hand with your employment contracts, book a call with our legal team and we’ll guide you through every stage of your legal needs.