Compare and Contrast Essay on Independent Contractor vs. Employee

Introduction

An employee is an individual contracted by an organization on either permanent or a temporary term and is entitled to the company benefits and a salary. On the other hand, an independent contractor is an individual or firm hired by a different organization to handle specific tasks, for a specific period and earns commissions for the work done (Fishman, 2017). The employer is responsible for providing resources and equipment to facilitate employee duties, but an independent contractor uses his/her equipment and supplies.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Rules That Distinguish an Independent Contractor and Employee

Tax Remission

The employer is responsible for paying federal and state unemployment tax and social security tax (Johnson et al., 2009). The employer also pays for employee compensation and disability premiums to an insurance fund. An independent contractor is responsible for paying his or her taxes. They are paid on commissions and do not enjoy any company benefits. Payment of tax is an important factor to differentiate between an employee and an independent contractor to an organization.

Company Benefits

Employees are entitled to company benefits such as stock options, health insurance, and retirement benefits. They also enjoy legal protection such as anti-discrimination, workers compensation, and unemployment. Independent contractors do not enjoy any additional benefits from the company. They are only paid commissions based on the agreed-upon rates and amount of work done.

Delegation and Subcontracting of Work

Independent contractors are hired to handle specific tasks in a company. They work independently of the company's control (Fishman, 2017). They can delegate the work or subcontract other companies or individuals to do the work on their behalf. An employee works on the program and under the instructions from the employer. Therefore employees cannot delegate their duties unless with the permission of the employer.

Mode of Payment

Employees are given a regular salary as compensation for their duties and responsibilities. They also receive payment for working extra hours not included in their contracts. On the other hand, independent contractors prepare an invoice to be paid commissions on the work done. The mode of paying determines whether an individual is an independent contractor or employee.

The Organization of Work

The employer controls employees, and they work on a specific schedule. They accomplish their tasks with the instructions given by the employer. Independent contractors are hired based on their skills and specialization for the duties they are hired to handle (Fishman, 2017). These contractors plan the way they do their work on their schedule and preferences.

Madrid and Berne should treat Joan as an employee. Joan is contracted to do bookkeeping which is a continuous activity for Madrid and Berne Company. Joan sits at the company and utilizes the company resources and equipment. The company has some controls over her activities as the management checks her work and gives it back for rectification before making payments. Joan cannot fully operate independently as her operations are on the client's premises. The presence of the contracting firm affects the independence of Joan and her schedule of work. She is required by the Madrid and Berne clients to serve them any time they need her service. Therefore, her schedule should be organized reflecting the company's schedule for the convenience of the clients. Madrid and Berne should hire Joan as an employee rather than an independent contractor, based on the circumstances under which she works. Employers contract people individually to cut on costs, which is not the right strategy for cutting operational costs.

Joan's classification on the scenario depends on different factors that characterize her tasks. Her remuneration structure for her duties classifies her as an independent contractor. She is paid on commissions for the work she accomplishes. The commissions are set on the fees the company determines and the amount paid by the different clients. The commissions that she receives are nor fixed for all responsibilities and tasks. The contract and nature of work determine her employment status. Joan is hired on a contract basis to undertake specific bookkeeping tasks for Madrid and Berne clients. An independent contractor is hired under a contract for a specific period and responsible for carrying out particular tasks (Boudreau, Jesuthasan, & Creelman, 2015). The nature of Joan's responsibilities classifies her as an independent contractor and not an employee for Madrid and Berne. The weekly payment mode also classifies her as a contractor as employees are paid fixed monthly salaries.

Joan is an independent contractor to the company, and that classification is best for her duties. Bookkeeping is a responsibility that is uncommon for clients. The service is not regular thus it is important to hire a contractor for this responsibility. The contractual agreements between her and Madrid and Berne fit the position of a contractor (Fishman, 2017). The classification is because Joan handles specific duties only on bookkeeping. The payment mode through commissions depending on the work done and the amount paid by clients also classifies her as a contractor. Therefore, Joan's contract with Madrid and Berne makes her an independent contractor who enjoys the use of the company's resources and equipment to serve the clients.

References

Boudreau, J. W., Jesuthasan, R., & Creelman, D. (2015). Lead the Work Navigating a World Beyond Employment. Hoboken: Wiley.

Fishman, S. (2017). Consultant & Independent Contractor Agreements. Berkeley: Ingram Pub Services.

Fishman, S. (2017). Working with independent contractors. Berkeley: CA: Nolo.

Johnson, L. M., O'Brien, L., Campbell, A. D., Grange, J., & Johnson, L. M. (2009). Federal Tax Course 2009. New York: Cch Inc.