As governments and regulators sharpen their focus on employment misclassification, understanding the distinction between contractors and employees becomes crucial. Misclassifying an employee as a contractor can lead to legal and financial penalties that could pose a significant risk to your business. Understanding the differences between employees and contractors can help you determine which employment classification may be right for your team members.
Factors typically associated with contractor relationships
- Work schedule: Your contractor sets their own hours and work times, excluding project deadlines
- Autonomy: Your contractor has full control over how they accomplish a task
- Duration of work: Your contractor is engaged with your company for a temporary length of time
- Employment status: Your contractor publicly acknowledges they are self-employed or employed by a contracting entity rather than an employee of your company
- Supervisory role: Your contractor does not manage employees at your company, for example, by reviewing their work or assessing their performance
- Multiple clients: Your contractor can perform work with other companies as a contractor in addition to your company
- Training: Your contractor can complete their tasks without training from your company
Expenses: Your contractor invoices your company for expenses rather than submitting an expense report - Insurance and liability: Your contractor manages their own professional liability and insurances
- Equipment: Your contractor supplies their own equipment
If you’re planning to hire employees internationally, Gusto Global, powered by Remote, can help simplify the process.
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