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What Is the Definition of an Independent Contractor

An independent contractor is a natural or legal person who is responsible for performing work for another company or providing services to another company as a non-employee. As a result, independent contractors must pay their own Social Security and Health Insurance taxes. In addition, the company is not required to provide the contractor with benefits such as health insurance, which it would otherwise have to provide if the contractor were an employee. The payer must correctly classify each beneficiary as an independent contractor or employee. Another term for an independent contractor is a freelancer. If you are an independent contractor, you are self-employed. To find out about your tax obligations, visit the Self-Employed Tax Centre. In contrast, independent contractors must provide benefits for themselves, including employer and employer payment of the portions of Social Security and Medicare payments, including expenses. The independent contractor must continue to meet the quality standard and the payer`s deadline when manufacturing the product.

Independent contractors often work for employers who are physically distant from their location. As such, they must be prepared to compete in the global labor market. Being an independent contractor has disadvantages because they do not have access to unemployment insurance or workers` compensation benefits. Certain factors define an employee as an independent contractor in all cases: not relying on the company as the sole source of income, working at his or her own pace as defined in an agreement, not being entitled to the benefits provided by the employer, and maintaining a certain degree of control and independence. Another factor to consider is the relationship and regularity of the transaction between the independent contractor and the hiring party. Important factors to consider are separate advertising, obtaining licenses, maintaining an office, and providing tools and equipment by the independent contractor. If the service provided is to be completed at a certain time, as opposed to an indefinite period, the determination of independent contractor status is more likely. Despite these limitations, joining a union as an independent contractor can bring many useful benefits and resources. The local can help you get health and equipment insurance, give you contract advice and help you find and get a job. The union can also fight for your legislative interests and offer educational programs. A thriving example of a unit of independent entrepreneurs is the Guild Freelancers, an active group of freelance writers and journalists who organized as part of the Pacific Media Workers Guild, a local chapter of the CWA. Another great example is WashTech (the Washington Tech Workers` Alliance), a CWA site founded in 1998 by Microsoft contract employees.

As an independent contractor, you have the right to ask a state or federal agency to review your employment status. If you think you are an employee and have a problem with your employer regarding your salary or hours of work, click here. If you are being discriminated against and would like to know if you are an employee under the Americans with Disabilities Act or Title VII, please contact the nearest EEOC office. According to, an independent contractor is “a person or business that provides services to another person or organization under a contract between them, specifying conditions such as duties, payment, amount and type of work and other matters. An independent contractor is different from an employee who regularly works for an employer. You are not an employee of the company or entity for which you provide services, but they pay you for your service. Essentially, you are your own business; a self-employed person who provides work for external companies. Perhaps the biggest anger for independent contractors is paying taxes for the self-employed. The portion of your paycheque that would normally be withheld by an employer will be paid to you instead. Then you have to pay these taxes yourself.

The 15.3% self-employment tax covers what you owe for Social Security and Health Insurance. It is your responsibility to ensure that you set aside money for these taxes, as it will not be subscribed by your employer. This, along with the lack of benefits, really makes you your own manager. You need to manage your income like a business, even if you`re not registered. Shelters that allow employers to take advantage of independent contractor status and avoid penalties include: the previous practice of treating similar employees as independent contractors and the presence of a previous IRS audit that did not require the payment of taxes. For more information on whether you are an independent contractor or an employee, see the section on independent contractors or employees. If an employee is an independent contractor, the tenant is not required to make any of these payments. In an attempt to interpret the provisions of the Fair Labour Standards Act and to distinguish between the status of an employee and that of an independent contractor, some federal courts and agencies have developed the “economic realities test.” If you`re not sure if you own the rights to a work you`ve created or a product you`ve developed as an independent contractor, read your contractual agreement. If you see a clause that looks like this – “The Contractor agrees that any work or invention designed, written or created in the performance of work under this Agreement is the sole and exclusive property of the Company” – you probably do not own the rights to that work. An independent contractor or freelancer is a natural or legal person who is responsible for performing work for another company or providing services to another company as a non-employee. Subscribe to America`s largest dictionary and get thousands of additional definitions and advanced search – ad-free! Independent contractors deliver goods or services under the terms of a contract they have negotiated with an employer. Independent contractors are not employees and therefore do not fall under most federal labour laws.

They are not protected against discrimination in the workplace by Title VII, nor are they entitled to leave under the Family Medical Leave Act. Employers are not required to pay for the overtime of independent contractors under the Fair Labour Standards Act or to provide accommodations for a contractor`s disabilities under the Americans with Disabilities Act. An employer is also not responsible for the unemployment or workers` compensation benefits of an independent contractor and is not required to provide a pension or other employment benefits to an independent contractor. In addition, an employer does not have to pay payroll taxes for an independent contractor. In addition, an independent contractor is more likely to be exposed to the risk of making a profit or loss on the work performed. An employee is usually paid on an hourly, salary or commission basis, while an independent contractor typically receives an agreed amount or according to an agreed formula for a particular job. . . .