The independent contractor controls the process of completing the work. So, employers need to provide independent contractors with the necessary details and due dates. But independent contractors are their bosses. employees, employers decide the time and schedule for employees. Working hoursĬonsidering the working hours for independent contractors vs. A few independent contractors in industries like construction or real estate might even ask for an advance deposit. They might opt for a monthly payment, per project, bi-monthly, or even hourly payment. In case of independent contractors, the payment terms may vary. When you hire an employee, they provide their services for a fixed monthly remuneration. So, let’s see what these factor-based differences are. These factors included in the employee vs contractor checklist must be ticked off before you can conclude a worker is an employee or independent contractor. When in doubt whether a worker is an employee or independent contractor, you must check out a few factors. Differences between an Employee and an Independent Contractor So, knowing the taxation rules is important. But also, you might have to pay penalties in case of any misclassifications related to work. Not withholding taxes and benefits not only creates an undue burden on contractors and employees. It might be an issue if you aren’t aware of the basic taxation. Plus, unlike employees, they are not entitled to any benefits and stuff like unemployment insurance. Independent contractors file and pay their income taxes. If a worker falls under the category of an independent contractor, there’s not much work to be done for the employer. Also, the documentation of taxes is different in a contractor versus an employee. Plus, you also need to withhold and pay Social Security and Medicare taxes and unemployment taxes on their compensation. employee taxes.įirst off, if a worker is classified as an employee, you need to withhold, deposit, report, and make payment of employment taxes. Now, you know why it is crucial to understand independent contractors vs. Misclassification of workers can result in penalties for your business. So, without any delay, let’s get started! What are The Classifications of Workers for Taxation? employee that you will learn about as you read on. Whereas independent contractors generally work on a contractual basis.īesides, there are several other differences in contractor vs. employees.īy definition, the difference between an employee and an independent contractor is that an employee is a long-term worker in your organization. Then, perhaps, you should know everything about independent contractors vs. Are you planning to employ both employees and independent contractors?