A Glossary of HR Terminology

Glossary of Human Resources Management and Employee Benefit Terms

A Glossary of HR Terminology

Glossary of Human Resources Management and Employee Benefit Terms

HR Wordbook > Independent Contractor

HR Wordbook > Independent Contractor

Independent Contractor

Independent Contractor

What Is an Independent Contractor?

An independent contractor is a worker who is under contract to provide services for an organization but who is not an employee there.

The purpose of hiring an independent contractor vs. an employee is to receive a service on a temporary basis and/or to avoid the added expenses (benefits, taxes, etc.) of hiring an employee.

 

What Are Examples of Independent Contractors?

An independent contractor can perform any kind of work for an organization. Some common professions for independent contractors include:

  • Construction tradesperson
  • Auto mechanic
  • Real estate agent
  • Web developer
  • Customer support agent
  • Marketer
  • Writer
  • Graphic designer
  • Accountant
  • Lawyer
  • Doctor

 

What Is the Difference Between an Employee and an Independent Contractor?

When comparing independent contractors vs. employees, there are some differences between the two.

Employees:

  • Are under the supervision of their employer
  • Are covered by employment and labour laws
  • Earn a salary, according to set pay periods
  • Report taxes

Independent contractors:

  • Are not supervised by an employer
  • Are not covered by employment and labour laws
  • Are paid either hourly, daily, or weekly, but the total amount is due via invoice when work is completed
  • Have control over their schedule and day-to-day work 
  • Are not generally offered benefits from the hiring employer

 

What Are the Benefits of Being an Independent Contractor?

  • Being their own boss. While an organization hires a contractor to do work for them, the contractor has all control over when and how the work is performed. 
  • Not being dependent on a single company for their paycheck. Contractors may work for multiple companies at a time and can decide for themselves how much work they take on and how much they charge for their services.
  • The potential to pay less in taxes. This is not a guarantee, but contractors can take advantage of business-related tax deductions for necessary business expenses.

 

What Are the Drawbacks of Being an Independent Contractors?

  • Job, salary slip, and debt security. If a contractor doesn’t secure work, they don’t get paid. If a client doesn’t pay, the contractor has little recourse, and if debts rack up, contractors are liable.
  • Employer-provided benefits. Health insurance, retirement benefits, bonuses, paid vacation and sick time, profit sharing are generally not offered to independent contractors. However, contractors may be qualified for a self-employed health insurance deduction.

What Is an Independent Contractor?

An independent contractor is a worker who is under contract to provide services for an organization but who is not an employee there.

The purpose of hiring an independent contractor vs. an employee is to receive a service on a temporary basis and/or to avoid the added expenses (benefits, taxes, etc.) of hiring an employee.

 

What Are Examples of Independent Contractors?

An independent contractor can perform any kind of work for an organization. Some common professions for independent contractors include:

  • Construction tradesperson
  • Auto mechanic
  • Real estate agent
  • Web developer
  • Customer support agent
  • Marketer
  • Writer
  • Graphic designer
  • Accountant
  • Lawyer
  • Doctor

 

What Is the Difference Between an Employee and an Independent Contractor?

When comparing independent contractors vs. employees, there are some differences between the two.

Employees:

  • Are under the supervision of their employer
  • Are covered by employment and labour laws
  • Earn a salary, according to set pay periods
  • Report taxes

Independent contractors:

  • Are not supervised by an employer
  • Are not covered by employment and labour laws
  • Are paid either hourly, daily, or weekly, but the total amount is due via invoice when work is completed
  • Have control over their schedule and day-to-day work 
  • Are not generally offered benefits from the hiring employer

 

What Are the Benefits of Being an Independent Contractor?

  • Being their own boss. While an organization hires a contractor to do work for them, the contractor has all control over when and how the work is performed. 
  • Not being dependent on a single company for their paycheck. Contractors may work for multiple companies at a time and can decide for themselves how much work they take on and how much they charge for their services.
  • The potential to pay less in taxes. This is not a guarantee, but contractors can take advantage of business-related tax deductions for necessary business expenses.

 

What Are the Drawbacks of Being an Independent Contractors?

  • Job, salary slip, and debt security. If a contractor doesn’t secure work, they don’t get paid. If a client doesn’t pay, the contractor has little recourse, and if debts rack up, contractors are liable.
  • Employer-provided benefits. Health insurance, retirement benefits, bonuses, paid vacation and sick time, profit sharing are generally not offered to independent contractors. However, contractors may be qualified for a self-employed health insurance deduction.