Employee vs. Independent ContractorsHR Resource
June 18, 2012 — 1,676 views
Accurately determining the legal difference between an employee and an independent contractor is critical to the success of an organization. Numerous tax complications and liability and healthcare issues depend on the classification of an individual party.
The primary IRS test an HR professional can use to determine whether a worker is an employee vs. independent contractor is often referred to as the right of control. If a worker is an independent contractor they have the right to control or direct the result of the work and what will be done or how it will be completed. In contrast, if an employer has a legal right to demand how a project will be done, even if they decide not to exercise that right, then the worker is classified as an employee.
The distinction between employee and independent contractor is important, and an employee misclassification could have dire results. For example, a business treating employees as independent contractors may be held liable for employment taxes for workers, in addition to other legal penalties.