ASK HR with Sheila McKinley-Bell

Introducing a new addition to our newsletter: ASK HR. Each issue will include answers to your questions regarding a variety of human resources related topics to help you with some of the pressing needs of your business. Our expert is fellow member, Sheila McKinley-Bell of Shoreline HR Consulting, www.shorelinehr. com . Please feel free to let us know what questions or topics are on your mind. Today’s question is: There is such confusion about the difference between an independent contractor and an employee, can you explain?

Independent contractors are individuals or businesses who perform work/services with a contracted understanding of the terms, such as duties, pay, and the amount and type of work. Businesses often use independent contractors for services to avoid bringing employees on staff for shortterm needs. Although the business has control over the work an independent contractor does for them, an independent contractor has control over HOW work is completed. They are typically project-based workers who have autonomy in how they complete the work as long as they complete it as agreed.

An independent contractor works for themselves and is not technically employed by the business they are working for. They can work and operate for several clientbusinesses at a time. Typically, an independent contractor has specialized skills that are supplemental to the business’ core products or services. Independent contractors submit invoices for their work and the business paying for their goods and services does not deduct taxes or statutory benefits from those payments. Instead, the independent contractor is subject to paying selfemployment tax. Employees do not work for themselves. The employer controls and supervises the details of their work and provides the tools and materials and location where the work is performed; the employee has no investment in the work facilities or equipment. Employment is typically extended, rather than for a specified or limited time period. The work performed is an integral part of the business’ products or services. The employee does not have opportunity to profit, or loss based on the business’ performance. The business is responsible for withholding payments for certain Federal and State taxes and statutory benefits, such as unemployment, Social Security and workers’ compensation from the employee’s pay.

Ultimately, the key difference is does the worker control how they work? If yes, they are an independent contractor. If no, they are an employee. I recommend exploring the IRS.gov website for further information. In particular, Publication 5520 – How Businesses Determine if a Worker is an Employee or Independent Contractor.

Sheila can be reached online at sheila@shorelinehr.com or by phone at 860-256-9881.