Question

Please explain the differences between an “employee” and an “independent contractor" in detail.

Explain them in business law, please.

Answer 1

Answer-

An employee is an individual who works directly for you. The worker’s status of employee or independent contractor is determined by who has the control in the situation. With an employee, you determine their work hours, where they work, how they do their work, the time line in which they must do their work and provide the tools required to do the work. An employee is considered to be a permanent fixture to the company and reports to your place of business on a regular basis. Your business will typically provide benefits for the employee and a written contract will be established between you and your employee of the employee’s expectations. An employee is likely to receive training from you. They typically paid by the hour and regardless of their performance. An employee will also be working for you on a continuing basis but are able to quite or be fired at a moment’s notice. Now that we have  looked at the different aspects of hiring an employee, now we will look at the various characteristics of hiring an independent contractor.

Independent contractors are normally independent business people. Independent contractors are able to choose their own work locations and utilize their own equipment, tools, software, or materials. They set their own hours based on the work you have requested from them and the time frame that you both agreed upon for completion.   They decide on how they will get the work completed that you have hired them for and generally require little to no training for the work they are hired to accomplish. Independent contractors see first-hand the quality and quantity of the service they provide through the profits they obtain or the losses they suffer. They also manage several different customers just as you would as a business owner and work on an as needed basis. They are typically paid a flat rate and responsible for their own benefits. Finally, depending on the terms of the agreement between you and your independent contractor, they can possibly leave or be terminated according to the agreement. Now that we have gotten a viewpoint of both employees and independent contractors, we will now discuss the route I am interested in going with my business idea and why.

Having an employee or independent contractor to share the work load is a great concept and understanding the implications of hiring either have helped me with determining what I would like for our business. DCBrim Steel Concepts will be a brand new, budding start up business. I believe the best route for us, until we get our feet firmly planted would be the hiring of an independent contractor. Financially, this seems the best route to go. Whereas employees require us to file payroll taxes and are fall under labor laws, independent contractors do not. Expenses incurred by hiring an independent contractor or a flat rate, predetermined expense with no surprises. We only pay them when we utilize them and in the beginning stages of our business, when we are just taking off, I do not foresee us requiring the services of a full time employee. Of course, the government would rather have businesses hire employees so they can keep an eye on the treatment of those employees and have a better grasp on how much money is changing hands. Employees are eligible for many legal protections, these apply to overtime, unemployment, and other key labor laws. Key labor laws include minimum wage, overtime, work hours, meals, time off, equal pay for equal work, discrimination, hiring the disabled, and child labor. As an employer, we also are required legally to withhold taxes from salaries. Independent contractors just invoice their employers and receive paychecks where no deductions are withheld. They oversee their own tax requirements. The government is not as content with this aspect of individual contractors because they are less reliable when it comes to submitting their taxes. However, if an employer pays $600 or more to an individual contractor in a calendar year, it must be reported as miscellaneous income and filed via Form 1099-MISC on your taxes. Given the simplicity, legal implications, and financial aspects of working with an independent contractor, I undoubtedly feel that this is the route our business should take when pursuing an employee. Once our feet are grounded and we have a firm grasp on how we are running our business, then we could move on to more permanent employees. However, independent contractors are abundant in the industry that we are pursuing. With that said, if we were to hire a full or part time employee, it would be as an administrative fixture in the business.