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.