Employee Vs. Contractor: What You Need to Know
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
The IRS has very stringent guidelines for classifying someone that performs work for your small business as an employee or a subcontractor. The IRS has Seven Tips for Business Owners You can find those tips here.
Cheryl Lynch is a consultant at the FSBDC office in Putnam County. She has been the owner of several small businesses and has expertise in start-up ventures, financial and operational systems, human resources, marketing, mergers and acquisitions, sales, strategic planning, training and tactical execution. Cheryl holds a CAM license and has a Bachelor’s Degree in Finance.