Independent Contractors may call themselves by a variety of different names-  freelancers, consultants, self-employed, or entrepreneurs; but in most cases, if you contract them for work, they are not legally employees.

Classifying Independent Contractors Vs. Employees

Many businesses find themselves facing a snafu when it comes to differentiating employees and independent contractors. While there are various benefits to hiring ICs, there are high risks of classifying them incorrectly.

Pro’s and Con’s of Independent Contractors

When hiring an IC, businesses can save money on payroll taxes, benefits and workers’ comp insurance. True ICs offer specialized expertise for a short period of time. There is no expense to train them, and once they are done fulfilling their contract, the IC and the business go their separate ways.

One disadvantage of hiring an IC is that they can sue you for negligence if they are hurt on the job; something regular employees usually cannot do due to workers’ compensation insurance. Additionally, the tax related fines of misclassifying an employee as an IC can be extreme. To avoid any confusion, check out the IRS 20 Factor Test on Employment.