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Independent Contractor vs. Regular Employee: What’s the Difference?

June 1, 2022

Independent Contractor vs. Regular Employee: What’s the Difference? 1200 629 Shegerian Law

There are two common ways to go about when making a living: you may go the employee route, move up the ranks in the corporate ladder, and reach a position you desire; or, go the business route, where you try to make a name for yourself and become your own boss.

These two routes can be likened to regular employees and independent contractors. The two employment statuses can be mistaken for the other, especially if you are not familiar with federal and state employment laws. These laws help you learn which category you fall under to ensure that you are not missing out on benefits and opportunities the federal government offers its workforce.

Either status will earn you a living; however, when thinking about the path you want to go for, you must first understand the difference between the two. The infographic below will give you a comprehensive view of the differences between independent contractors vs. regular employees.

 

Infographic guide to independent contractor vs. regular employee

 

What is an Independent Contractor?

An independent contractor is a self-employed individual or entity that a company hires to perform a specific type of work. Independent contractors are also called “freelancers” and are not considered employees under the company that contracted them.

A survey in 2020 showed that nearly 44-million people were self-employed, with 14% of workers saying that being an independent contractor was their primary job.

 

What is a Regular Employee?

A regular employee works either full-time or part-time for a single company. The company dictates when the employee works, how long they should work, where they should work, and the kind of work to be performed.

 

Comparison Between Independent Contractors and Regular Employees

Payment of Wages

a. Independent Contractor

There are two ways you can be paid as an independent contractor, depending on the agreement with the company.

  1. Hourly – Some contractors are paid hourly like an employee. However, it would depend on how many hours you worked on a job. For example, if someone hired you to create a design for a flyer, you would be paid based on how long it took you to do the job.
  2. Project basis – The other way is paying for the work done. For example, if someone hired you for a cleaning job, you would get paid a set, agreed-upon amount for cleaning the space.

b. Regular Employee

For regular employees, payment is through salary, usually fixed and agreed upon in a contract. However, this could have a downside. Only specific tasks and responsibilities are associated with the fixed salary, but you could still work long hours and even on weekends.

Benefits

a. Independent Contractor

Since you’ll only be paid for the work you do, taking days off due to sickness or vacation isn’t paid. You also won’t receive a company pension, retirement plan, or healthcare package.

b. Regular Employee

A regular employee can receive many benefits, including insurance like medical, life, dental, and retirement, vacation pay, holiday pay, parental leave, and other bonuses depending on the company.

Employment Laws

a. Independent Contractor

Since independent contractors are not regular employees, they aren’t covered under most federal employment statutes. Furthermore, employers aren’t required to pay contractors overtime or provide disability accommodations for anything a contractor might have. No compensation benefits are to be given, and no employment taxes need to be paid.

b. Regular Employee

A regular employee is entitled to coverage under federal and state statutes. Full employment rights can be expected. These laws also protect an employee from any discrimination or illegalities. Primary federal laws are the following:

Hiring Practice

a. Independent Contractor

When hiring independent contractors, a client will put up a job post with a description including what they’re looking for in a contractor. Once the job scope has been stated, only then will the agreement be discussed. The contract can include everything from work scope to compensation and other fine details.

b. Regular Employee

The HR department typically takes care of the hiring process for regular employees. They are contacted if HR sees their potential, then screened and interviewed. If the company deems them fit, they will be onboarded, complete with the agreed-upon benefits.

Autonomy

a. Independent Contractor

Independent contractors aren’t bound to company laws and regulations. They can work without the company controlling the way they do it. There are no best practices to follow, and they have the freedom to work the way they want to as long as they get the job done.

b. Regular Employee

Regular employees are bound by their signed contracts. Upon entering the company, they are put into training to ensure that they can do their work the way the company wants them to.

Flexibility

a. Independent Contractor

Apart from having the freedom to do work the way they want, independent contractors have flexibility in terms of job opportunities. If you’re an independent contractor, you’re free to work on as many projects or clients as you like, given that you can deliver all of them. Since you’re not bound exclusively to one client, you can spend more time working on other projects for different clients.

b. Regular Employee

Unlike an independent contractor, regular employees are legally bound to the company they work for. This means that you cannot be employed under a different company. Moreover, regular employees are usually asked to do a specific task and do it repeatedly unless stated that the scope of the job has changed.

 

Know your Employment Status

Many people remain unaware of whether they’re independent contractors or regular employees. Knowing your employment status is crucial because you need to know the benefits you are entitled to and the specific laws that protect you. This way, you also prevent losing benefits, fixed income, or insurance and protect yourself from discrimination.

Today, large companies may take advantage of independent contractors by lowering their pay and benefits while still overseeing and controlling how they perform their jobs. In cases such as this, thorough research on the topic can allow you to assert your rights if necessary.

If you suspect any illegal employment processing in your organization, get in touch with an employment lawyer. May it be a general query or an actual complaint, Shegerian & Associates provides our clients with the best legal service. Let’s talk soon!

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