independent contractor versus Employee

Working as an independent contractor or as an employee is a decision that must be made when starting the search for a work-at-home position.  Many small businesses prefer to contract with independent persons because they do not have the added legal constraints that hiring an employee brings.  While other larger corporations prefer to hire employees because they are able to have more control over employee work timelines.  Either position has both benefits and negative aspects.  Below you will find some general definitions and expectations for independent contractors and employees. 

Independent Contractor

General Definition:  “A legal term for a person who is hired to do work for another person but who is not an employee or agent of that person. The hiring person is not responsible for the actions of the Independent Contractor nor does she owe that Independent Contractor the same legal duties owed by an Employer to an Employee under labor and employment laws.”

• Independent Contractors work as their own boss, usually working under a written contract for an individual or business.
• Independent Contractors receive a 1099 from those they have worked for throughout the year to use to file their own taxes.  Taxes are not withheld by the individual or company they are contracted with.
• Independent Contractors have added flexibility because their time is not micromanaged by an employer, they are under contract to provide the services within the specified time frame, but that is the limit of control.
• Independent contractors are not entitled to health benefits through the businesses they contract with.
• Independent contractors are usually responsible to provide their own work space, office equipment and supplies.

Employee

General Definition: “A person who is hired to provide services to a company on a regular basis in exchange for compensation and who does not provide these services as part of an independent business.”

• An employee works under the direct supervision of a manager or boss.
• Employee taxes are withheld by their employer according to Federal tax laws.
• Employees are entitled to wage increases, paid breaks, as governed by law, and to certain benefits such as disability and unemployment as governed by different state and federal laws.
• Some states require businesses to offer health benefits to their employees.
• Businesses generally provide employees with the needed equipment and supplies to complete their tasks.

Whether you choose to work an independent contractor or as an employee, the benefits of working at home are difficult to match.  Consider your needs as well as your families to decide which decision is best for you and the type of income you need.

Posted:Tuesday, July 24, 2007