TIPS FOR DETERMINING
EMPLOYEE VERSUS CONTRACTOR STATUS
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It is always a difficult problem to determine who is an employee or
contractor and preventing those hired as contractors from being employees,
or vice versa. Some of the major factors to be considered are as
follows:
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1. The extent to which the worker has unreimbursed visit expenses.
Independent contractors are more likely to have unreimbursed expenses than
employees. Employers should not routinely approve reimbursement requests
for business-related expenses, because this could be used as evidence of
employee status.
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2. The extent of the workers' investment. An independent contractor
often has a significant investment in the facilities he or she uses in
performing services for someone else. One of the most significant
investments is office or workspace. Employers should not provide tools,
equipment, or supplies to individuals who are hired as independent
contractors.
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3. The extent to which the worker makes services available to the
relevant market. If the worker does the same work for other companies,
it's a key indicator of independent contractor status.
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4. An employee is generally paid by the hour, week, or month.
Independent contractors are usually paid by the job.
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5. An independent contractor usually makes a profit or loss on the job.
Employees receive paychecks whether the company they work for makes money
or not.
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6. Does the employer provide employee-type benefits such as insurance,
pension plans, vacations, or sick days. Independent contractors do not
usually provide this type of benefit.
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7. Workers who are hired on a permanent basis are usually considered
employees. If a worker is hired with the expectation that the relationship
will continue indefinitely, this shows generally an employer/employee
relationship.
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8. A key aspect is the services performed by the worker or the regular
business of the company. Regular workers provide services that are key
aspect of (inaudible) and it's more likely that the employer will have a
right to direct and control over their activity.
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