| Employee or Independent Contractor | |
| a quick guide
|
|
Employee |
Independent Contractor |
| 1. Instructions | |
| Employees comply with instructions about when, where, and how work is to be performed. | Contractors set their own hours and do the job in their own way. |
| 2. Training | |
| Employees are trained to perform services in a particular way. They are required to take correspondence courses and attend meetings. Other methods also indicate that the employer wants the services performed in a particular way. | Contractors use their own methods and receive no training from the purchaser of their services. |
| 3. Integration | |
| Services of an employee are merged into the business. Success and continuation of the business depends upon these services. The employer coordinates work with that of others. | The success and continuation of the business aren’t dependent on services provided by a contractor. |
| 4. Services Rendered Personally | |
| Services must be rendered personally. An employee does not engage other people to do the work. | Contractors are able to assign their own workers to do the job. |
| 5. Hiring, Supervising, Paying | |
| An employee hires, supervises and pays workers at the direction of the employer (i.e.: acts as foreman or representative of the employer). | Contractors hire, supervise and pay the other workers as the result of a contract. A contractor agrees to provide materials and labor and is responsible for the results. |
| 6. Continuing Relationship | |
| An employee continues to work for the same person year after year. | Contractors are hired to do one job. There is no continuous relationship. |
| 7. Set Hours of Work | |
| An employee’s hours and days are set by the employer. | Contractors are masters of their own time. |
| 8. Full Time Required | |
| An employee normally works full time for an employer. | Contractors are free to work when and for whom they choose. |
| 9. Doing Work on Employer’s Premises | |
| Employees work on the premises of an employer; or on a route, or at a site, designated by the employer. | Contractors work off an employer’s premises and use their own offices, desks, and telephones. |
| 10. Order or Sequence Set | |
| An employee performs services in the order or sequence set by the employer. Salespersons report to the office at specified times, follow-up on leads, and perform certain tasks at certain times. | Services are performed at a contractors own pace. Salespersons work their own schedules and usually have their own offices. |
| 11. Oral or Written Reports | |
| Employees are required to submit regular oral or written reports to the employer. | Contractors submit no reports. |
| 12. Payment by Hour, Week, Month | |
| Employees are paid by the employer in regular amounts at stated intervals. | A contractor is paid by the job on a straight commission. |
| 13. Payment of Business and/or Travel Expenses | |
| The employer pays employees’ business and/or travel expenses. | Contractors take care of their own expenses and are accountable only to themselves for expenses. |
| 14. Furnishing of Tools, Materials | |
| An employer furnishes tools, materials, etc. | Contractors furnish their own tools, etc. |
| 15. Significant Investment | |
| An employee has no significant investment in the facilities used to perform services. | A contractor has a real, essential and significant investment. |
| 16. Realization of Profit or Loss | |
| An employee cannot realize a profit or loss by making good or bad decisions. | Contractors can realize a profit or suffer a loss as a result of their services or decisions. |
| 17. Working for More than One Firm at a Time | |
| An employee usually works for one employer at a time. | An independent contractor works for a number of persons or firms at the same time. |
| 18. Making Services Available to the General Public | |
| An employee does not make services available to the general public. | Contractors have their own offices and assistants. The hold business licenses, are listed in business directories, maintain business telephones, and otherwise generally make their services available to the public. |
| 19. Right to Fire | |
| An employee can be discharged at any time. | Contractors cannot be fired so long as product results meet contract specifications. |
| 20. Right to Quit | |
| Employees can quit their jobs at any time without incurring liability. | Contractors agree to complete a specific job and are responsible for satisfactory completion; or they are legally obligated to make good for any failure. |
Above Summary is reprinted from IRS Tax Facts, January, 1992
Download the current IRS
Publication 1779 covering this issue
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