Employee vs. Contractor Status
Since there are quite a few jobs out there and it's likely
that many of you are contemplating offers this spring, I thought it might be
time to revisit employee vs. contractor status.
Here is the short notes version of what you should know!
What is the
difference between being an employee and a contractor?
If you are an employee, your employer issues you a check and
pays your withholding taxes. Depending on your FTE you may qualify for vacation,
sick time and other miscellaneous benefits. At the end of the year you will
receive a W2 form.
If you are a contractor, you are essentially being treated
as if you were a business. You still get a check from the employer, but you are
responsible for all payroll taxes and you do not qualify for any benefits. At the end of the year you will be issued a
What is the
Both require a contract and the contracts should
cover pretty much the same things.
You are subject to the policies and procedures
of the organization.
Both agreements may include non-competes.
What are the pros and
Employees can be eligible for employer benefits
such as healthcare.
Employees may participate in the employer's
retirement programs (401K).
Contractors can deduct many expenses that
employees are not allowed to deduct, such as home office, car, mileage, cell
Contractors cannot draw unemployment.
Contractors must pay their own payroll taxes,
which may necessitate hiring an accountant.
Contractors must buy and pay the full cost of their
Contractors do not get sick time or vacation
from the employer.
What is the bottom
line if I choose to work as a contractor?
Add at least 25% to your hourly rate to cover
your payroll taxes. For example, if you want to net $50 per hour then you need
to charge at least $62.50 per hour.
Clarify who will be paying your malpractice.
Sometimes staffing companies will cover your malpractice if you are on an
assignment, but it's not always the case. If you are responsible for your own
malpractice, be sure that you budget the cost into your hourly rate.
Find out what health insurance will cost you before
you set your hourly rate so that you can build the expense into your rate.
Consider using the services of an accountant to
ensure you pay the proper taxes and maximize your deductions. Factor this cost
into your rate, too.
Visit our job board to see the latest employment opportunities in your area!