Employees versus Independent Contractors

When you hire someone, should they be an employee or an independent contractor? Maybe they would be both, but at different times. An employee is one that is paid a salary or hourly wages for working for your business. He/she works an assigned time, at a specific location and you provide the necessary material/supplies/equipment for them to complete their work. Employees are paid an agreed upon amount and set pay day. The business is responsible for paying the employee on time as well as withholding taxes from the employee’s paycheck and submitting all withholding taxes by their designated deadline (federal and state). . Lastly, the business is responsible for paying its share of employee taxes (the business’s portion) of employee with-holdings plus any workmen’s compensation on employees. Yes, it cost more than the hourly wage you pay your employee(s) to have an employee(s). An employee receives a W-2 form at the end of the year, mailed by January 31. The deadline for each business is dependent on your structure aEmployees vs Contractornd/or number of employees, etc. The exact timeline and reporting requirements can be found at www.irs.gov.


An independent contractor is an individual or business that provides its own material/supplies/equipment to complete a job for you. In other words, you do not tell them how to accomplish a job/work, you simply contract with them to perform a service. They supply the knowledge and resources to get the task accomplished. Independent contractors are paid an agreed upon amount at an agreed upon pay date. You should have agreements identifying tasks to be delivered with completion dates. An independent contractor receives a 1099 form for work completed in a fiscal year mailed by January 31. No taxes are withheld from their checks. They are responsible for their own taxes.

So, now that you know the difference between employees versus independent contractors, which one is applicable to you and your business?