There is a lot of confusion surrounding the difference between being an employee and an independent contractor. Since wahwithme shares work at home and remote job leads, I thought it’s about time that I clear some of the confusion up.
If you’re searching for a remote, or even a brick-and-mortar, job this article will help distinguish the pros and the cons of working as an employee or an independent contractor.
The following table is a simple breakdown of some of the differences between these two types of employment. Please be aware that the differences are on a case-by-case basis and not every company or contract is the same. The differences in the table are some common points to mention.
If you work as an employee, you’ll be protected by state and federal labor laws and if you’re a contractor those laws will not apply to you.
This table will tell you some key, board differences between each employment types, but If you’re looking for strict laws, regulation, and tax information regarding employment and self-employment please research on your government’s official website.
|Hiring||An application is usually completed for a particular position and handled by human resources. The applicant has an interview in most cases, and then receives a job offer. Once the job offer is accepted, the employer will ask for additional information like date of birth, marital status, and citizenship status. Employees typically are long-term workers.||A contractor usually interacts with a specific department or person that wants a certain task or service completed. The contractor enters into a contract(a statement of work.) Contracts can last a few weeks to a few years and sometimes are renewed.|
|Training||An employer trains their employees and pays them for their time in training. This training could take place in a virtual classroom setting with other students, on a schedule, and could last as little as a couple days or even a month. However, in some cases it may be self-paced module, but still paid training.||A contractor may get training material for free to complete on their own time, they may be required to pay for training, they may have training in a classroom setting that has a set schedule, or they may receive other types of unpaid training. This depends on the contract. Training is usually at the contractors expense and rarely paid.|
|Fees||Depending on the state you live in, most companies that employ you will take care of onboarding fees including your background check, training, and sometimes even equipment. This, however, is not always the case. Some states don’t require employers to pay for background checks, as an example, and you may be expected to pay for these out of pocket.||As a contractor it’s unlikely that any fees will be paid for you. Fees will be your responsibility. You may need to purchase training, materials, and equipment to complete the contract.|
|Employment laws||Covered by federal and states laws labor and employment laws. (E.g. an employee must be paid overtime once they reach a certain amount of hours.)||Not covered by employment and labor laws.|
|Taxes||An employee provides all of the required information like name, address, SSN, tax relationship status, exemptions etc., so that the employer can handle their taxes.At the end of the tax year an employer reports all money paid and taxes withheld during a tax year on a W-2. In short the employer takes care of the tax stuff and you simply file the forms.||A contractor will provide an address, Taxpayer Identification Number, and more on a W-9, and will report payments of $600 or more on Form 1099 in the calendar year. Contractors are responsible for withholding their own income taxes and paying what’s due during the year.|
|Compensation||Will be paid an hourly rate or a salary. Employees typically have pay periods, bi-weekly is the most common. but pay periods can very by week or month. Federal and state laws require that an employee with non-negotiable pay is paid on a normal pay date or earlier if there is a holiday.||A contractor is paid for work completed, which could take an hour, a day, week, or a specific month. A contractor’s pay date depends on the contract statement of work. Payments could be due when the job’s complete, or periodically throughout the contract while the job is still being worked.|
|Other agency reporting||Reports for federal and state Unemployment Insurance.||None.|
|Benefits||Employees who work full-time hours may qualify for their employers group insurance for vision, dental, health, disability, and more.||Contractors are responsible for purchasing their own insurance through a provider of their choice.|
|Schedule||Most times as an employee your employer will give you schedule based on company needs (e.g. a regular ol’ 9-5.) You’ll be required to ‘clock in’ and ‘clock out’ for breaks and lunches. In most cases, some of your breaks will be paid.||As a contractor you usually get to work when you feel like it. With the occasional exception, you won’t have any set schedule like an employee’s shift work. You also won’t be paid for breaks unless specified in your SOW.|