Employees vs. Independent Contractors: Three Key Differences

Did you know that freelance workers have contributed an estimated $1.2 trillion to the American economy?

More and more workers are going freelance instead of working as how we traditionally define “employees”. As a worker and as a business, there are pros and cons to each. Before you decide to work with a freelancer, it’s important to understand what you’re signing up for.

Are you wondering what the differences are between employees vs. independent contractors? Keep reading to learn about the three key differences.

1. Autonomy

One major difference between an independent contractor and an employee relates to how much creative freedom they have. Often not discussed or perhaps misunderstood, this distinction makes a huge difference knowing that an independent contractor usually has much more autonomy with their creative process as long as they deliver the agreed-upon service or product.

The business that’s contracting with the independent worker can give them a task or project, but they won’t give them strict guidelines relating to how they do it. The timeline and work hours tend to be less rigid as well.

2. Payment, Benefits, and Taxes

Unlike an employee contract, an independent contractor agreement doesn’t come with a salary. Instead, a business pays the contract for each project or by an agreed-upon hourly rate. The payment can come before the work is completed or after.

An employee gets paid often by the hour and is on the payroll. Aside from hourly wages and a salary, an employee often also has health insurance and other benefits. This employer-based benefit is different from independent contractor insurance, which is the responsibility of the contract worker.

Don’t forget that payroll withholds some payments from an employee because those portions will go to taxes. Conversely, an independent contractor is responsible for paying their own taxes as a freelance worker. Independent contractor income is normally reported on a 1099 tax form.

If you’re ever unsure of something or suspect reporting or payment discrepancies, you can always seek the counsel of a legal professional.

3. Training

An employee is often seen as a long-term investment for the organization. By giving them the appropriate training, a business hopes that they’ll rise in the ranks and do their best to help grow the company in return.

This mindset doesn’t also apply to an independent contractor. These types of workers are often expected to already be familiar with whatever services they’re offering.

Are You Ready to Hire Independent Contractors?

If you encounter any issues relating to the classification of one type of worker over another, you can consult with an established and reliable law firm. Our team of legal professionals specializes in employment contracts, business law, and so much more.

You’re more than welcome to reach out to us for a free consultation. We look forward to putting our seasoned team to work representing your case.