Employee vs. Contractor: What's the Difference?
Edited by Huma Saeed || By Sumera Saeed || Published on November 18, 2023
An employee works directly for a company; a contractor provides services under a contract, often self-employed.
Key Differences
An employee is an individual who is hired by a company or organization to perform specific tasks within that entity, usually on a full-time or part-time basis. They are often subject to the company's rules and procedures and may receive benefits like health insurance and paid leave. In contrast, a contractor is typically self-employed or works for a separate entity and is hired to complete a specific project or set of tasks, often for a limited period. Contractors usually have more control over their work and hours but often do not receive the benefits that employees do.
Sumera Saeed
Nov 18, 2023
Employees are generally considered an integral part of the company they work for. They may have a structured career path within the organization and are often eligible for promotions and raises based on performance. On the other hand, contractors are usually hired for their expertise in a specific area and work independently. They may work for multiple clients simultaneously and are not typically involved in the company's internal career progression.
Sumera Saeed
Nov 18, 2023
In terms of legal and tax implications, employees are often subject to employment laws and have taxes withheld from their paychecks by their employers. They may also be covered by the employer's liability insurance. Conversely, contractors are responsible for handling their own taxes and insurance. They are considered independent businesses and are not covered by most employment laws that protect employees.
Sumera Saeed
Nov 18, 2023
Employees often have a fixed schedule and work location set by the employer, and they may be required to use the company's tools and resources to perform their job. Contractors, however, typically have more flexibility in determining their work hours and location and usually use their own tools and resources to complete the work.
Janet White
Nov 18, 2023
The relationship between an employer and an employee is often long-term and may include opportunities for professional development and advancement within the company. In contrast, the relationship between a client and a contractor is typically project-based and ends once the project is completed, although it can lead to future contracts if the work is satisfactory.
Sara Rehman
Nov 18, 2023
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Comparison Chart
Type of Work Relationship
Directly hired by the company
Hired under a contract for services
Sumera Saeed
Nov 18, 2023
Benefits and Protections
May receive benefits, covered by employment laws
No company benefits, not covered by employment laws
Sumera Saeed
Nov 18, 2023
Tax and Legal Responsibilities
Taxes withheld by employer, less tax/legal paperwork
Handles own taxes and insurance, more paperwork
Sumera Saeed
Nov 18, 2023
Flexibility and Control
Fixed schedule, less control over work
Flexible schedule, more control over work
Sumera Saeed
Nov 18, 2023
Longevity and Career Path
Often long-term with career progression
Project-based, typically no career progression within the client company
Janet White
Nov 18, 2023
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Employee and Contractor Definitions
Employee
A worker under company’s control.
As an employee, he follows the company's schedule.
Sara Rehman
Oct 30, 2023
Contractor
Self-employed or from a separate entity.
She works as an independent contractor.
Janet White
Oct 30, 2023
Employee
A person part of an organization’s structure.
Every employee has a role in this organization.
Harlon Moss
Oct 30, 2023
Contractor
A worker with control over work details.
The contractor sets her own working hours.
Huma Saeed
Oct 30, 2023
Employee
A person hired for wages or salary.
She is an employee at the local bank.
Huma Saeed
Oct 30, 2023
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Contractor
A person providing services under a contract.
The contractor finished the remodeling on time.
Janet White
Oct 30, 2023
Employee
A worker protected by employment laws.
The employee is entitled to paid leave.
Harlon Moss
Oct 30, 2023
Contractor
A worker handling own taxes and insurance.
As a contractor, he pays his own taxes.
Aimie Carlson
Oct 30, 2023
Employee
One receiving benefits from the employer.
The employee enjoys health insurance benefits.
Janet White
Oct 30, 2023
Contractor
A person hired for a specific project.
They hired a contractor for the software development.
Aimie Carlson
Oct 30, 2023
Employee
A person who works for another in return for financial or other compensation.
Sumera Saeed
Oct 13, 2023
Contractor
One that agrees to furnish materials or perform services at a specified price, especially for construction work.
Sumera Saeed
Oct 13, 2023
Employee
An individual who provides labor to a company or another person.
One way to encourage your employees to work harder is by giving them incentives.
Sumera Saeed
Oct 13, 2023
Contractor
A person or company that performs specific tasks like electrical or plumbing work in construction projects.
Sumera Saeed
Oct 13, 2023
Contractor
A person or company hired to maintain existing facilities like air conditioning systems, groundskeeping, etc.
Sumera Saeed
Oct 13, 2023
Contractor
A person hired to do a job on a business contract, as opposed to a permanent employee.
Sumera Saeed
Oct 13, 2023
Contractor
One who contracts; one of the parties to a bargain; one who covenants to do anything for another; specifically, one who contracts to perform work on a rather large scale, at a certain price or rate, as in building houses or making a railroad.
Sumera Saeed
Oct 13, 2023
Contractor
The bridge player in contract bridge who wins the bidding and can declare which suit is to be trumps
Sumera Saeed
Oct 13, 2023
FAQs
What defines an employee?
Someone hired by a company for wages with some level of control by the employer.
Sumera Saeed
Nov 18, 2023
What defines a contractor?
Someone providing services under a contract, often self-employed.
Huma Saeed
Nov 18, 2023
Do contractors get company benefits?
Generally, contractors don’t receive benefits from the client.
Harlon Moss
Nov 18, 2023
Can employees work for multiple companies?
Usually, they work for one company but may have side jobs.
Janet White
Nov 18, 2023
Do employees get benefits?
Typically, employees receive benefits like health insurance.
Sumera Saeed
Nov 18, 2023
Can contractors set their own schedule?
Typically, they have more flexibility in scheduling.
Sumera Saeed
Nov 18, 2023
Do contractors use their own tools?
Often, contractors use their own tools and resources.
Aimie Carlson
Nov 18, 2023
Can an employee become a contractor?
Yes, sometimes employees transition to independent contracting.
Aimie Carlson
Nov 18, 2023
Can contractors work for multiple clients?
Yes, contractors often work for multiple clients.
Aimie Carlson
Nov 18, 2023
Are employees protected by labor laws?
Yes, employees are covered by various employment laws.
Sumera Saeed
Nov 18, 2023
Are contractors covered by employment laws?
Generally, no, they are considered independent businesses.
Janet White
Nov 18, 2023
Do employees use company tools?
Usually, employees use resources provided by the employer.
Janet White
Nov 18, 2023
Do contractors have more location flexibility?
Generally, yes, especially if it’s not specified in the contract.
Janet White
Nov 18, 2023
Is job security different for employees and contractors?
Employees often have more job security, while contractors have project-based security.
Sara Rehman
Nov 18, 2023
Who handles a contractor’s insurance?
Contractors typically handle their own insurance.
Janet White
Nov 18, 2023
Can a contractor be hired as an employee?
Yes, a contractor can be offered an employment position.
Janet White
Nov 18, 2023
About Author
Written by
Sumera SaeedSumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.
Edited by
Huma SaeedHuma is a renowned researcher acclaimed for her innovative work in Difference Wiki. Her dedication has led to key breakthroughs, establishing her prominence in academia. Her contributions continually inspire and guide her field.
