An independent contractor is a self-employed professional who provides services to an entity. Organizations or entities that use independent contractors (also known as international contractors) do not need to provide them with employee benefits such as contributions to social programs or training materials. Entities must classify workers as an independent contractor if they meet certain criteria.
What is the difference between independent contractors and employees?
Employers must distinguish between independent contractors and employees. Correctly classifying these two types of workers eliminates risks of misclassification. Here are a few differences between these two types of workers:
Unlike employees, independent contractors aren’t required to work a certain number of hours at a designated location determined by the employer. Contractors choose where, how, and when they work. Employers can generally only measure a contractor’s end result.
Contractors bring the professional experience and training needed for the project and provide their own supplies (e.g., photographers use their own camera, tripod, lighting, and so on). Finally, independent contractors may hire other professionals to help with the work, while employees generally cannot hire someone to assist them.
Employees are paid an hourly wage or salary by the employer in regular intervals and do not invoice the employer for their work. During payroll, employers must withhold certain taxes (Medicare, Social Security, and so on) from wages.
Independent contractors, on the other hand, must submit invoices detailing the completed work. They are typically paid per deliverable or per hour and receive payment after sending an invoice. Independent contractors can also work on a retainer basis, collecting payment in advance for regular work. Independent contractors are responsible for paying their own taxes and aren’t provided with additional benefits such as dental care, gym stipends, PTO, sick days, etc.
Employees are typically hired to perform work indefinitely (for example, a marketing copywriter will work on copy for the company’s ongoing marketing initiatives). Employees generally work for only one employer and receive training so that work is done according to the company’s standards. Employers provide employees with tools for the job and can largely control how the work is done.
Employers generally hire contractors on a short-term basis and for specialized work. For instance, a company may hire an interior designer to decorate a new office, or a lawyer for a one-off consultation.