Contractors are a different classification of employee than a full-time worker. This classification may mean that contractors require special consideration for their workplace benefits.
Employee benefits to contractors often differ from those full-time employees. Therefore, employers need to understand who classifies as a contractor.
What Employees Are Contractors?
Understanding the difference between employees and contractors may help a business determine how to offer benefits.
Independent contractors are usually self-employed. They agree to work for a business based on the stipulations of a contract. But, what makes a contractor different from a standard employee? Don’t employees also assume responsibilities for an employer?
Classifying someone as a contractor often depends on the work expected of them. As a general definition, the IRS says contractors are those who agree to complete the work, but the employer cannot control what the contractor does to complete the work. The employer (or payer) can usually only control the result they expect from the work. Therefore, independent contractors retain a degree of independence from the employer. By contrast, full-time employees often have rules from employers on how they must work.
Benefits for Independent Contractors
Often, businesses have a legal obligation to provide their full-time employees with benefits. These may include health insurance, workers’ compensation and other forms of protection. They may not have to provide these benefits to contractors.
Business owners may decide to offer benefits to contractors. On the other hand, they may choose to forego benefits for these individuals. Nonetheless, they should abide by all lawful stipulations regarding employment classifications. This can help the business avoid potential penalties related to employment benefits.
If an employer misclassifies a full-time employee as a contractor, it may face penalties. This is because it did not accurately represent its employment practices. Likewise, by inaccurately classifying contractors as full-time, the employer may wind up providing benefits is may not legally have to provide. This may lead to costs the business might otherwise be able to save.
Interpretations of full-time or contractor classifications often vary. A review of local or industry law, and a clearer understanding of full-time and contractor classifications can help businesses provide the best benefits. Employers should make sure every employee or contractor has benefits they legally need.
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