Employee vs. Independent Contractor: What's the Difference?
Edited by Aimie Carlson || By Janet White || Published on November 3, 2023
An Employee works under an employer's direction, receiving benefits and a salary, while an Independent Contractor offers services under a contract, often without typical job benefits.
Key Differences
An Employee typically has a more permanent role within a company and operates under the guidance and direction of the employer. In contrast, an Independent Contractor is hired for specific projects or tasks and decides how to accomplish them.
Employees often receive benefits like health insurance, paid leave, and retirement contributions from their employers. Independent Contractors, however, usually handle their benefits, taxes, and other financial responsibilities independently.
The relationship between an employer and an Employee is ongoing unless terminated by either party. On the other hand, an Independent Contractor's relationship with a client ends once the contracted work is complete, unless extended by a new agreement.
Control is a distinguishing factor. Employers have more control over Employees' work, including when, where, and how tasks are performed. In contrast, Independent Contractors have autonomy over their work, adhering only to the terms of their contract.
Legally, Employees have certain rights and protections, like minimum wage and anti-discrimination laws. Independent Contractors do not have these same protections as they're viewed as running their business.
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Comparison Chart
Nature of Relationship
Ongoing unless terminated.
Usually for a specific project or duration.
Control Over Work
Employers dictate how, when, and where work is done.
Have autonomy, guided by contract terms.
Benefits
Often receive job benefits like health insurance.
Typically don't get benefits from clients.
Financial Handling
Employers handle taxes, insurance, and other deductions.
Manage their own taxes, insurance, and expenses.
Legal Protections
Covered by employment laws, e.g., minimum wage laws.
Fewer employment protections, seen as business entities.
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Employee and Independent Contractor Definitions
Employee
Subject to employer-set schedules and guidelines.
The Employee must adhere to the company's dress code.
Independent Contractor
Hired for specific tasks or projects.
The company hired an Independent Contractor for their website redesign.
Employee
Works within an organization or business structure.
As an Employee, Lisa attends weekly team meetings.
Independent Contractor
Operates autonomously, deciding how to fulfill the contract.
The Independent Contractor chose his tools and methods for the job.
Employee
An Employee is someone hired to perform tasks under an employer's direction.
Sarah is an Employee at the tech firm, working 9 to 5.
Independent Contractor
Responsible for their own business expenses and taxes.
The Independent Contractor filed her taxes quarterly.
Employee
Typically receives regular wages or salary.
Every month, the Employee receives a paycheck.
Independent Contractor
An Independent Contractor offers services to clients based on a contractual agreement.
Jane, an Independent Contractor, completed the project in three months.
Employee
They have an ongoing work relationship with an employer.
As a long-term Employee, Mark enjoys job security.
Independent Contractor
Typically doesn't receive employer-provided benefits.
As an Independent Contractor, Mike secured his health insurance.
Employee
A person who works for another in return for financial or other compensation.
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.
Employee
One employed by another.
Employee
A worker who is hired to perform a job
FAQs
What is an Employee's primary characteristic?
An Employee works under an employer's guidance, typically receiving a salary and benefits.
How does an Independent Contractor differ from an Employee?
Independent Contractors offer services based on a contract and operate with more autonomy than Employees.
Who handles an Independent Contractor's taxes?
Independent Contractors are responsible for managing and paying their taxes.
Can an Independent Contractor work for multiple clients?
Yes, they can work for multiple clients simultaneously or consecutively.
Do Employees always receive benefits like health insurance?
While many do, it's not guaranteed; benefits vary by employer and employment terms.
Do Employees have more job security?
Generally, Employees have more stable, ongoing relationships with employers than Independent Contractors.
What rights do Employees have?
Employees have rights granted by employment laws, like minimum wage, overtime, and workplace protections.
Who provides tools and resources for an Independent Contractor's work?
Usually, the Independent Contractor provides their tools and resources.
Who is responsible for work training?
Employers typically train Employees. Independent Contractors, however, are expected to have the necessary skills.
How is an Employee's work schedule determined?
Employers typically set Employees' schedules and work expectations.
Who is at financial risk in an Independent Contractor's work?
The Independent Contractor assumes financial risks related to their work and business.
Do Employees always work on-site?
Not necessarily; some Employees may work remotely based on their job role and employer's policies.
Are Independent Contractors covered by employment laws?
They have fewer protections and are generally not covered by typical employment laws.
How do employment benefits differ for the two?
Employees often receive benefits from employers, while Independent Contractors usually manage their own.
Are Independent Contractors self-employed?
Yes, they're considered self-employed professionals running their business.
Are there any legal considerations when hiring an Independent Contractor vs. an Employee?
Yes, misclassifying can lead to legal consequences. It's essential to distinguish the nature of the relationship correctly.
Can an Employee negotiate their contract terms?
While some can, especially in higher positions, many Employees have standardized contracts.
Can you convert from an Employee to an Independent Contractor with the same company?
Yes, but it involves changing the nature of the relationship and often the terms of compensation and work.
Do Employees have the flexibility to choose projects?
Generally, Employees work on assignments given by their employers.
Can an Independent Contractor work remotely?
Yes, they often have the flexibility to choose where they work, unless specified in the contract.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Aimie CarlsonAimie Carlson, holding a master's degree in English literature, is a fervent English language enthusiast. She lends her writing talents to Difference Wiki, a prominent website that specializes in comparisons, offering readers insightful analyses that both captivate and inform.
