Archive for the ‘independent contractor’ tag

Independent Contractors or Employees?

January 16th, 2015 at 2:22 pm

independent contractors or employees, Illinois employment law attorneyFor a small business owner, one of the most important decisions he or she must make is how to acquire the help needed to run the company. An owner must choose between hiring employees, utilizing independent contractors, or some combination of both. It is very important to understand the difference between employees and independent contractors, as each classification carries with it different requirements and responsibilities.

According to labor and tax regulations, there is no single standard for determining employee or contractor status. There are, however, a number of factors which, when weighed together, may offer some clarification to an individual’s classification. The Internal Revenue Service (IRS) has divided the relevant considerations into three basic categories:

1. Behavioral Control

Employees typically have the details of their work controlled by an employer. They are directed how, when, and where to work, and may receive instructions on what resources are available to help them. They also may be provided with training on the manner in which the work is expected to be completed.

An independent contractor is likely to be allotted a great deal more freedom as to the specifics of completing assigned work. The final product is typically of more importance than following a particular method or work schedule.

2. Financial Control

Understanding who bears the responsibility for the monetary aspect of the work may also help determine if an individual is an employee. In most cases, employees are not expected to invest personally in a project, and incurred expenses are usually reimbursed by the employer. Additionally, personal profit or loss are not a concern for employees.

Independent contractors may be required to invest financially in their work, and often are not reimbursed for all expenses. Therefore, a contractor may be likely to realize a profit or absorb a loss to a much greater extent than an employee.

 3. Relationship of the Parties

Contracts and the offer of benefits also may be useful considerations to a worker’s status.  Health insurance, retirement investments, and vacation days are examples of benefits often made available to employees but rarely to independent contractors. In some cases, a written contract may be the only way to clearly indicate the relationship intended between the company and the individual. A contract often states, in clear language, whether the individual is an employee or an independent contractor.

Contractors or Employees at a Glance

According to the U.S. Small Business Administration, independent contractors typically:

  • Use a separate business name and business accounts;
  • Have employees;
  • Advertise their business and keep business records;
  • Have multiple clients which are invoiced for completed work;
  • Maintain tools and resources; and
  • Set working hours independently.

Employees usually:

  • Work under the control and direction of others;
  • Receive training for job related activities;
  • Have a single employer and are paid regularly.

Independent contractors may seem attractive to a small business owner as the owner often realizes savings in labor costs, less liability, and increased flexibility in acquiring and limiting the working relationship. A business owner, however, must be sure that workers are classified correctly or risk serious financial and tax consequences.

If you own a business in Illinois and have questions about classifying your workers, contact the Miller Law Firm, P.C. today. An experienced employment attorney in Illinois will review your situation and help you protect your investment now and in the future.

The Differences between an Employee and Independent Contractor

May 28th, 2013 at 2:46 pm

If you are an employer, you have to define the role that each person plays in your organization. Part of this definition is determining whether those on your payroll are defined an employees or independent contractors. There are several differences between the two as outlined below.

ChristineThe most important difference is the right of control. If you control the way that a job is done, or if you provide the tools that are used to complete the job, then the worker is considered an employee. If you have no control over the way that a job is done except for the results of the job, and the worker uses his own tools or materials, then the worker is considered an independent contractor.

Another factor that determines the designation of the worker is the way that the worker is paid. If the worker were paid per job that he does for you instead of by the hour or if he is paid per project without guarantee of future work, he would be classified as an independent contractor.

The designation of the worker is also dependent your responsibility over the worker’s actions. If you will be responsible legally for the negligence of the worker, then that person is an employee. An employer has no legal responsibility over the negligent actions of an independent contractor. This is a very important distinguishing factor.

As an employer, it is important that you make it very clear to all of your workers what their role is. Once you have defined those roles, it is important that you designate duties and responsibilities according to those roles. If not, you could find yourself on the receiving end of a lawsuit. If you have questions regarding the differences between an employee and an independent contractor, a qualified and knowledgeable Illinois employment attorney can provide you with those answers.