Question

What are the differences between an employee and an independent contractor?

What are the differences between an employee and an independent contractor?

Homework Answers

Answer #1

Normally, both of them can be paid by a business for similar work, however from taxation view point the two are treated differently. There are other differences as well which are as follows:

  • In the case of an employee, while paying wages/salary, company will deduct income tax, social security and medicare from gross pay. However for an independent contractor, company does not withhold tax.
  • Independent contractor is not subject to employement and labour laws.
  • They are engaged for specific time periods unlike employees.
  • They can decide their working hours but for employees their working hours are mainly determined by clients.
  • Traditional non monetary benefits such as stock options, health insurance are not provided to independent contractors unlike employees.
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