Yakima County Development Association - Employees and Independent Contractors: The Difference is Important

Jean Brown

Article by:
Jean Brown

Jean publishes a blog called the Enterprise Corner.  It features articles on entrepreneurship, local industry trends, manufacturing news and periodic ‘toolbox’ articles showcasing assistance, incentives and other resources for local businesses.



Employees and Independent Contractors:  The Difference is Important

Employees and Independent Contractors: The Difference is Important

February 28, 2014

I was out visiting a local business who raised a pertinent question.  He wondered whether it would be better to hire an employee or an independent contractor for an upcoming job.  It all depends, was my answer – because this is an area of employment law where you need to be careful. 

Classically, employees go to work at set hours while independent con­tractors set their own. Employees follow orders, while independent contractors don’t. Employees receive regular paychecks while independent contractors are paid by the job.  Move up http://i.forbesimg.com t Move down

Employees work year-round, while independent contractors are temporary. Employers control employee actions, while independent contractors work on their own. Of course, in real life lines blur and classifications are second-guessed.  Here is a link to the Bureau of Labor’s page defining independent contractors – it is a good resource.

With independent contractors you don’t have to withhold taxes or pay benefits and they are easier to fire. But if your “independent contractors” are reclassified as your employees the IRS can assess crippling retroactive penalties. See Ten Consequences of Reclassifying Independent Contractors as Employees.

For small businesses a worker status dispute can quickly domino. Defining your crew as contractors or employees impacts taxes, labor and employment law, benefits, worker’s compensation, unemployment insurance and more. 

Take caution when using independent contractors.  You should not take chances or stretch the definition of your contractors and employees.  If you have any doubts it is probably better to err on the side of defining your workers as employees.  You can also check with an attorney prior to hiring a contractor or employee.  Being prudent is your best bet – the costs of doing things right pale in comparison to the fines and penalties if you run afoul of the law. 

For other hiring resources click here.

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