Employee vs Contract Worker: What you should know as an employer and as a worker

When hiring or starting a career it is important to understand the differences between an employee and a contract worker and how they can affect your work. From financial to emotional to legal factors, making sure you have the right position will help in the long run. 

 

Main Differences

Employee

Employees are hired by a company to do work related to the work of the company. Their contracts are generally for on-going work, and the employee shouldn’t have the opportunity to lose money as a result of their job. This means the company covers any work-related expenses, as well as providing benefits to full-time employees.

 

Contractors

Contractors, or independent contractors, are technically self-employed. Contracts with companies have specific expectations and conditions, and the contractor is in charge of their own work. This means the employer is not in charge of the contractor’s hours or the specifics of their work prior to the final result. 

 

When Hiring

 Employees

Employees benefit companies due to their signed commitment to the company and responsibility to follow directives from their employers. You will have control of their schedules and deadlines. You have the legal authority to fire an employee if they are failing to do their job properly. The final benefit of hiring an employee is that you are less likely to be faced with a lawsuit for misclassifying a worker with all the duties of an employee as a contractor.

 

Some downsides to hiring an employee are that any mistakes they make are the responsibility of your company. You are responsible for their training, conduct, and general wellbeing if they are a full-time employee. Full-time employees are entitled to various benefits: health insurance, paid leave, worker’s comp, etc. If you are a small business that is hiring a part-time worker doing a job that doesn’t fall under the scope of your industry (you’re a coffee shop but you need to hire someone to paint the walls, painting isn’t what is expected of a coffee shop employee), hiring a contractor makes more sense than hiring a new employee. 

 

Contract Workers

Contract workers can benefit an employer by providing a necessary service that isn’t considered to be in the field of the business. There’s no point in bringing on a plumber as an employee if they only come in when pipes need to be fixed. You might need someone to build your website, but don’t need them as a long-term member of your team. Contract workers manage their own time and benefits, meaning they don’t need you to provide them with paid leave or health insurance.  Each state has different requirements for what employers are legally responsible for regarding contract workers, and a consultation with an employment lawyer is highly recommended if you are unsure whether to hire someone as an employee or contract worker.

 

Downsides of hiring contract workers instead of employees arise mainly when employers hire a worker as a contractor when they should be an employee. If the worker doesn’t know they should be an employee, it is unlikely that legal action will be taken. If they do figure it out, it could spell out bad news for your company. Strict laws are being written to keep companies from hiring contract workers as opposed to employees for tax and finance reasons. If you are unsure if the role you’re looking to fill should go to an employee or a contractor, or if you’re a contractor wondering if you’re supposed to be an employee, you can find a helpful list of questions to determine the proper title of the job here.

 

When Planning Your Career

Employee

If you are at the start of your career, it probably makes more sense to be an employee due to the benefits, job security, and training that comes with signing on with a company. There are skills that come with working on a team and for a boss that transfer well into independent work if that’s where you decide to take your career. A Forbes article from 2013 helps to weigh out the pros and cons of being an employee versus an independent contractor and came to the conclusion that employment is better for team players while contracting is better for entrepreneurs. The article also talks about the financial security of being an employee: “If something goes wrong for an employee, it may not be too bad because it’s often part of a group failure; and, short of termination, the personal financial consequences aren’t devastating. There’s still a salary.”  The stability of employment makes it better for those starting out their careers.

 

Independent Contractor

To be an independent contractor you need to have an expertise people are willing to pay for. If you are a writer with decades of experience in technical writing, you will most likely not have too much difficulty as an independent contractor. If you’re just starting out with a communications degree and no work experience you might not have as much luck getting commissioned. If you think you have the expertise to be a contractor then you have the benefit of planning your own schedule, setting your own wage, and doing the work you want to do. These benefits come with the downsides of bearing full responsibility for any failures you face and being in charge of finding your own health insurance. 

 

Final Thoughts

Hiring managers should keep legal implications in mind when deciding to hire an independent contractor versus an employee. You may be short-changing your worker if they should be receiving the benefits of an employee, and you may be short-changing yourself if your employee should have been hired as a contractor. If you’re unsure where you stand with your worker, seek legal advice.

If you’re trying to plan your career, you need to consider your skillset and financial stability. If you’re uncomfortable with the risk of living contract to contract and possible severely suffering when you fail to get commissioned, you should consider employment. If you want the freedom to do your work in your own way without the pressure of an employer, you should look into what it takes to be an independent contractor in your field. 

No matter what you decide to do, it’s important to know what you legally deserve in compensation for your work. Don’t be afraid to do research into your state’s laws and fight for what you deserve.