An independent contract worker is someone who provides a service or product to another person, company, or organization, a transaction which is usually described in a contract or spoken agreement between the two parties. An independent contractor is not the same as a employee. Contract workers are less likely to work on a permanent, full-time basis for an employer, but instead work when required. In the United States, companies that hire contractors and pay them more than $600 in one year are required by law to report these payments to the Internal Revenue Service (IRS).
Difference From an Employee
Independent contractors are self-employed. They usually do not get benefits from their employer. They may be paid by the hour or by the project as opposed to getting an annual or monthly salary. The Supreme Court has outlined several key differences between hired employees and contract workers. The following are used to help employers distinguish between the two types of work:
- The more an individual is implicated in the business of the employer, the more likely he or she is to be an employee.
- Permanent, established relationships tend to be employer-employee.
- If the individual brings or uses his or her own equipment to work, he or she is more likely to be a contractor.
- When the worker has more control over work responsibilities, they are more likely to be an employee.
- A worker who has more financial risk as opposed to stability is likely to be a contractor.
- Work that is entrepreneurial or distinctive in nature usually favors an independent contractor relationship.
People who offer their services to the public or to private organizations in some capacity or another are usually independent contractors. Some common professions include professionals who own private practices in the health services field, such as doctors, dentists, veterinarians, masseuses, or midwives. Other common professions include those who provide specific legal services to companies or individuals, such as lawyers or accountants. People who are highly specialized in a specific field and offer consulting are also considered independent contractors. Many independent contractors are also hired by families. These include hair stylists, cleaners, nannies, gardeners, or pool maintenance service people.
Pros and Cons
Working as an independent contractor has benefits that being an employee doesn’t. It’s a good option for professionals with very specific knowledge who like the variety of working for a number of different organizations or individuals at the same time. Independent contractors tend to have more freedom; they can complete work when they want as opposed to working nine to five. Of course, with added freedom comes added responsibility. Independent contractors must be highly motivated to complete the work that they have as they typically aren’t supervised by their employer. In addition, working as an independent contractor comes with added risk; contractors don’t have the long-term job security that employees have.
An independent contractor is someone who works for an employer on a more casual basis than a full-time employee. He or she may be in a specialized field or have specialized services or goods to offer.