Employee or independent contractor: How to find out?

What are the differences between employee and independent contractor?

At several points it becomes essential for businesses to differentiate between an employee and an independent contractor. There are several points of distinction between the two. Of all the factors that affect one’s status as an employee or a contractor, it is the degree of control the person holds on his job  which is most important. There are several other factors too like the duration of employment, payment, resources used for the job etc. which are used to decide one from the other.

Degree of control:

The Independent contractors hold a higher degree of control over the tasks they are hired to perform. They are contracted for special tasks and the job mainly remains under their own control. They themselves get to decide how they do the job. The employer may decide the venue but it is the output finally that matters. On the other hand in case of the employees, the degree of control is lower as compared to the Independent contractors. The employees receive instructions from their employers  they are required to follow. The employer decides what type of the employee will do and also how he does it.

Duration of employment:

 The duration of employment in case of the contractors is generally smaller compared to the employees. Contractors are hired for  shorter periods like weeks or months whereas the employees once recruited can work with a  specific employer for as long as they or the employer or both like. Contractors’ job tenure gets over with the accomplishment of the tasks they are hired to perform.  

Payment:

 While employees are paid fixed salaries at the end of every month, the contractors are paid once at the completion of the tasks. They are not paid regularly like the salaried employees.


Resources: 

Contractors generally bring and use their own tools to perform their tasks. It is because they are generally hired to accomplish specialized tasks whereas the employees do all the regular stuff going on inside the office. In case of the employees, it is the employer who provides the required for performing the daily tasks.

Level of skills:

 Contractors are the people with high level of skills, specialized to accomplish the tasks ordinary employees cannot perform. The employees are generally required to specialize in the ordinary tasks they carry out regularly. However, even some employees may have very high level of skills depending upon the difficulty level of their job.


There are several other differences as well between an independent contractor and an employee. The independent contractors do not receive the same employment benefits like employees. They are not required to follow a fixed schedule like the employees. Neither are they entitled to union rights or other important benefits like unemployment compensation benefits. Independent contractors also bear the costs of the performance of their jobs. However, mostly it be comes clear by checking the degree of control that the person has over his/her job. Independent contractors generally remain free from the organizational rules and obligations that the employees have to follow. Employees are a part of the organization staff, the contractors are not.
Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-defined
http://www.forbes.com/sites/steveparrish/2013/12/16/should-i-be-an-employee-or-an-independent-contractor/#2245004c3e8f