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How are independent contractors different from employees?

According to the Internal Revenue Service (IRS), a independent contractor (IC) is subject to or enjoys a variety of responsibilities and rights that a regularly employed individual does not.

Perhaps one of the more obvious benefits ICs enjoy is the ability to have some flexibility as to where, how and when to work. These types of workers can't be asked to work specific schedules. The company soliciting the services of an IC can't require that all work be done on its premises alone either.

Any company that solicits the services of an IC should understand that it limits their ability to have a say over how results may be achieved. This means that you don't have a great deal of say over the order of how a contractor handles the work you assign to them. You also have little choice when it comes to whether they hire others themselves to carry out any work that they don't wish to do on their own.

It also limits how much they can be integrated into the overall operations of the business. Communication between the contractor and you, as the company soliciting their services, may be more irregular than can be expected of a typical employer-employee relationship.

ICs are typically expected to front the costs for any training necessary to carry out a specified task. They typically aren't paid a set amount at a set interval, but instead are paid on a project or commission basis instead.

The responsibility for covering travel or business expenses, such as office space, tools, materials and equipment falls on the contractor. Any profits or losses incurred are solely their own.

While most standard employees may work for a single employer, most ICs more commonly do. While the firing of employees can be done for a number of reasons, contractors can only be released from their contract if their results fall short of what was agreed to in their contract. Also, while employees quit their job whenever, contractors are legally obligated to satisfactorily complete any work before walking away from their role.

If you're looking to hire ICs and want to ensure you're properly handling your relationship with them, then a Pittsburgh Fair Labor Standards Act (FLSA) attorney can answer any questions you may have.

Source: California State University Long Beach, "IRS 20 determination factors and limitations/restrictions," accessed May 18, 2018

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