What are the differences between an employee and an independent contractor? In your opinion, which is more advantageous for a business owner to hire? Explain what factors should be considered when...

What are the differences between an employee and an independent contractor?

In your opinion, which is more advantageous for a business owner to hire? Explain what factors should be considered when making that decision. Be specific.

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Lorraine Caplan | College Teacher | (Level 1) Educator Emeritus

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An employee receives a regular paycheck, with all appropriate payroll deductions, while an independent contractor is paid for work completed with no payroll deductions and receives a 1099 form at the end of the year.  All of an employee's work activities are under the control of the employer, including time, place, and manner of work.  An independent contractor has a contract to complete a specified kind or amount of work and has the latitude to do that as he or she sees fit, often, though, with deadlines.  Various kinds of coverages, for example, unemployment compensation and workers' compensation, are mandated by law for employees, but not for independent contractors.  Benefits such as health insurance and paid time off are sometimes available to employees, but never to independent contractors.  Liability to the employer for employees' actions, within the scope of their employment, is a given, which is not the case for independent contractors.  The Internal Revenue Service and the Social Security Administration consider independent contractors "self-employed" for taxes and entitlement benefits.  Whether one is better off with an employee or an independent contractor is a decision that can never be made theoretically.  One must assess the costs, benefits, and risks for each, given the nature of the work and many other variables. 

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