Independent Contractor Definition

An independent contractor is a self-employed individual or entity hired to perform specific tasks or services for a company but is not considered an employee, typically responsible for their own taxes and benefits.

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What kind of team do you want your business to have to get work finished? If you don’t want to hire traditional employees to do the job, you can opt for using independent contractors. 

What is an independent contractor?

The independent contractor definition is basically the same in most states. You can hire independent contractors to do the same work an employee would do for you, but the relationship you have with them is different. Independent contractors are different from employees because they usually:

  • Are paid only by the project (instead of hourly, daily, by salary, etc.)
  • Don’t receive benefits employees receive (worker’s compensation, disability, health insurance, etc.)
  • Do their work with minimal supervision and direction from your business
  • Work (or can work) for many different businesses simultaneously
  • Use their own materials and equipment to complete projects for your business
  • Make their own work schedules

Also, you don’t withhold employment taxes from payments you make to an independent contractor. 

You can hire independent contractors to do many things for your business, including:

  • Manufacturing 
  • Graphic design
  • Sales
  • Bookkeeping
  • Cleaning
  • Research
  • Construction
  • IT

The list of tasks an independent contractor can do for your enterprise is practically endless. 

Using an Independent Contractor: The Advantages

Sometimes using independent contractors to run your business can be ideal compared to hiring traditional employees. It depends on your needs. Independent contractor benefits include:

  • Not having to withhold certain taxes on payments
  • Saving money on employee benefits
  • Not having to buy or use your own equipment for the projects the independent contractor completes
  • Not needing to train anyone on how to do the tasks the independent contractor completes

If you don’t need regular employees and you’re seeking a seasoned professional to handle certain business tasks for you, an independent contractor can be a great way to go. 

Using an Independent Contractor: The Disadvantages

Like many options in life, using an independent contractor isn’t ideal for every business. Hiring an independent contractor to handle your business tasks might not be the best because:

  • You have less control over an independent contractor’s work schedule
  • You have less control over an independent contractor’s work product
  • An independent contractor doesn’t have to work exclusively for you

Independent contractors make their own schedules and can decide how to complete the tasks they do for you. An independent contractor might not be as available to you as an employee because they’re likely working for many businesses at the same time.

In general, you don’t have much recourse against an independent contractor whose work habits don’t gel with your own—at least for the duration of the contract. With an independent contractor, if the final product substantially complies with your needs and is completed within a reasonable time, an independent contractor has fulfilled their end of the bargain. Also, if you want to get rid of an independent contractor before their contract with you is complete, you might have to pay a penalty. On the other hand, many states allow you to fire an unsatisfactory employee whenever you want, as long as your reasons aren’t discriminatory or against public policy. 

An independent contractor, by definition, is a lot more independent from your business than a traditional employee. If you need more control over the people completing your work projects, you’re probably better off hiring full-time or part-time employees. 

Using Independent Contractors Can Be a Great Alternative to Hiring Employees

There are a lot of factors to weigh when deciding whether to use the services of an independent contractor for your business. If you’re looking for a professional with experience and don’t have the time or money to hire and train employees, an independent contractor can handle your business needs. If you’re very particular about how and when your business tasks get completed, an independent contractor might not be the right fit for you. 

If you choose to use an independent contractor, you can maximize the control you have over the work project with a good contract. It’s best to speak to an attorney about how to draft a contract that covers your needs. 

When you hire an independent contractor to do a particular job, they receive the pay for the work being done but without the attachment that comes with the traditional employer-employee relationship. Owing to this flexibility, it might be a great option for you. Read more about “How to hire independent contractors” here.

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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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