Difference Between Employee and Independent Contractor

Difference Between Employee and Independent Contractor

There are a lot of things you have to aware of in order to function efficiently in the cooperate world. One of such things is the answer to this question – what is the difference between employee and independent contractor? This is a very important question that all business owners should know about in order to run their business as effectively as possible.

In a manner of speaking, both terms describe two similar groups of workers that are part of the labor force. Normally, they are both regarded as workers, but in a legal sense, there is a difference between employee and independent contractor.

It is important not to assume that there is no difference between independent contractor and employee because such assumption might cost you. Now, let’s get into the definition of these terms and why they are different.

Definition of Employee

An employee is anyone hired to work for some form of compensation, either on a part time or a full time basis. Typically, he or she is employed by the firm after a successful process of application and interview.

Just before a person can start working in an establishment, he or she is expected to understand the exact definition of employee. This includes reviewing and accepting the job description, and the reward for the job.

Defintion of Independent Contractor

An independent contractor is more like a freelancer or a self-employed individual. He or she agrees to work for a firm as a non-employee based on some form of agreement. These workers are usually experts in their careers and are a personified definition of independent contractor.

Before accepting a task, he or she interacts with the company representative directly to discuss how he or she can bring value to the organization.

Employee vs Independent Contractor Comparison Table

The table below shows a more defined distinction when comparing an employer and an employee.

Basis of ComparisonEmployeeContractor
DefinitionA person hired to work for some form of payment, either on a part time or a full time basisA freelancer hired to work for an establishment as a non-employee
Hiring process Applied for the job, went through at least one interview, before being hiredMay submit a proposal, interact with the client, and reach an agreement about the job
Job compensationPayment is usually per hour or per monthPayment is based on the total job done and the contract agreement
Tax responsibilitiesPartly covered by the employerTotally responsible for all tax payments
Employment lawsUnder the protection of government employment and labor lawsNot protected by government employment and labor laws
Work durationWorks for as long as is deemed necessary by the companyWorks for a specified period of time enough to complete the required task

Conclusion of the Main Difference Between Employee vs Independent Contractor

The dissimilarities mentioned in the table above are what make the difference between an employee and an independent contractor. Both of them have their perks and short comings. It is clear that none of these groups of workers can escape tax responsibilities, unlike what some people think. Whatever be the case, they still pay their dues to the government.