Many small business owners really aren’t sure whether or not their workers are employees or contractors. In fact, some contractors would be surprised to learn they actually are considered employees by government standards; unfortunately, even the most well intentioned small business owners could be at risk for costly lawsuits by making even a simple mistake when it comes to properly classifying workers. Here to help determine whether your worker is an employee or contractor are a few of the factors the government uses to distinguish between the two…just keep in mind, there are no less than a half dozen different laws each with different requirements so this is just a general guideline.
1.     Control. Contractors are typically in control of how work is performed, when it is performed and other specifications. They operate independently of your business and utilize their own discretion in critical questions related to quality, scheduling and other major decisions.
Independence. Contractors have a large degree of independence and latitude when it comes to their work. Outside of meeting the specifications of the contract, they also typically work for themselves
1.     as evidenced by billing, other clients, business license, training programs etc…
2.     Risk. Contractors bear their own legal risk as well as reward in relation to work performed.
3.     Delegation. Contractors can delegate work unless specifically prohibited by the original contract – workers cannot delegate and are typically responsible for their own work.
4.     Tools and Equipment. Contractors typically provide their own tools, equipment and training with the exception of specified or proprietary materials related directly to the project at hand (and which remain in the ownership and control of the employer).
Make sure your small business understands how to properly classify workers; better yet, let someone else handle it all for you at a fraction of the cost and time required to do it yourself. Remember, it’s completely tax deductible and allows you the extra time required to grow your business during these tough economic times.
