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Employee Vs. Independent Contractor

Employees and independent contractors work for larger companies doing a variety of jobs. Both of these positions may require similar educations, but they have very different responsibilities. This article discusses many of those differences.

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Comparing Employees to Independent Contractors

Employees work for an entity, either an individual or company, in return for wages and benefits and their employment typically does not have a predetermined end-date. An independent contractor is considered self-employed by the Internal Revenue Service and is contracted by an entity to perform a specific job in return for wages and their employment typically ends upon completion of the project.

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Responsibilities of Employees vs. Independent Contractors

The responsibilities of an employee and an independent contractor vary depending on the field of work. Generally, both will be required to perform tasks set out by their employer, meet deadlines, follow any and all safety protocols, and potentially cooperate and coordinate with other employees/independent contractors. However, employees will work directly for someone or for a company, while independent contractors are completely self-employed. The work of employees is totally controlled by an employer. The work of an independent contractor is totally controlled by the contractor and not another entity.

Employees

Employees work for an entity of some type and earn a regular paycheck. They commonly receive benefits that might include dental, medical and life insurance totally or partially provided by the company or institution. Most employees have federal and state income taxes withheld from their checks. Other federal withholdings are also commonly taken from employees' pay such as Social Security retirement and Medicare and Medicaid insurance. Employees will also be required to file some type of 1040 income tax form every year. Employees, depending on the jobs, will have varying educational backgrounds ranging from on-the-job training to advanced degrees. Also depending on the career field, they may be required to be licensed or hold a certain certification. Employees can be found working in nearly every industry, from information technology to education, and medicine to marketing.

Independent Contractors

Independent contractors are also known as the ''self-employed''. Like employees, independent contractors can be found in most industries. Independent contractors do not receive insurance benefits or Social Security contributions from their employers. Whereas employees are hired by one entity for long-term employment, independent contractors often have multiple clients at one time, and the predetermined length of each contract can range from days to months, sometimes even years. Independent contractors come from a variety of educational backgrounds, from on-the-job training to postgraduate degrees. They may also be required to have certain state business licenses and will pay state or federal taxes based on their status as a self-employed person and they may be subject to income taxes based on net profits and net losses depending on whether they own a business, trade or are a partner in a business. This self-employment tax, according to the Internal Revenue Service, takes care of Social Security and Medicare obligations.

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