Are You An Employee Or Independent Contractor?

Welcome back to the series, Things You Should Consider Before Starting To Work At Home.  Today we will be discussing what the difference is between being an employee or independent contractor.  This has been a question that has been debated for years.  In fact, I know of a few companies that have been challenged by their independent contractors who ended up as employee per the IRS.

The Internal Revenue Service uses three facts to determine the degree of control between an employee and an independent subcontractor.  They are:

1. Behavioral – Does the company control or have the right to control what the worker does and how the workers does his or her job?
2. Financial -  Are the business aspects of the worker’s job controlled by the payee? (these include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship – Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)?  Will the relationship continue and is the work performed a key aspect of the business?

These rules were taken directly off the IRS site here.

Things about an independent contractor

• Pays their own expenses
• Operates under their business name or their own name
• Typically works by projects or on straight commission
• Has more than one client/employer
• Sets their own hours
• Does not receive training.
• Keeps business records
• Pays their own taxes

Things about an employee

• Has set hours
• Given training for work to be done
• Taxes paid by employer
• Expenses paid by employer
• Has an employee handbook which could be a job description, manual, etc.

I wanted to talk about these things because when you are first looking at working from home you don’t realize these differences.

Please stop by tomorrow for the final installment where we talk about social media and how it works for you.