Employees vs. Independent Contractors

Are you classifying your labor force correctly?

It is important to understand the difference between employees and independent contractors, as misclassification of these types or workers can be costly to your small business.

• An employee is on a company's payroll and receives wages and benefits in exchange for following the organization's guidelines, policies and procedures.

• A contractor is an independent worker who has autonomy and flexibility but does not receive benefits such as health insurance and paid time off.

The IRS uses three categories to help distinguish employees from contractors:

· Behavioral Control – who controls what work is accomplished and how the work is done

· Financial Control – How the business pays the worker

· Relationship – permanency of the relationship

Employee	Independent Contractor
​Receives Instructions on when, where, and how to work	​Sets own schedule and hours
Trained by employer	Has autonomy in how the job is performed
​Furnished with tools or materials necessary	​Has own tools and equipment
​Continuing relationship with employer	​Does same work for multiple people

You can find more information about this topic by visiting the IRS Website.

Knowing all of the rules and regulations small businesses are bound by can be a daunting task, which is why it is imperative to have a close working relationship with the accounting and legal professionals that serve your business.

If you need help with this topic, or any other needs related to your small business, please give us a call!