Employees vs Independent Contractor -- What's the difference

When hiring people to work for your business, you have two options -- you can either hire an employee full-time or work with an independent contractor.

An employee is someone who will work for your organisation in exchange for a fixed remuneration ( the salary) and some employment benefits. On the other hand, an independent contractor works for your company on a specific project and gets paid a fixed fee for the services provided.

Here are some of the key differences between an employee and an independent contractor:

The Work

Employees are hired by organizations for a specific job title or position. The terms of employment are defined by the employment contract and the organisation has full control over the work of an employee - what, how and when is it done. Also, unless otherwise determined, an employee works solely for the employer.

On the contrary, independent contractors are hired by organizations for a specific service on a contract or freelance basis. The terms of engagement are defined by the contract signed between the organisation and the contractor. The independent contractor has complete control over how they work and when they work. They are also free to work on multiple projects at once.

The Duration

The employees work for your business on a continuing basis and may have to assume a wide variety of roles and responsibilities. If they wish to leave, they need to abide by the employment contract and provide you with an adequate notice period.

Independent contractors work on specific tasks/projects and their relationship with your business is a temporary one. On completion of the project, they are free to terminate your relationship and move on to other projects.

The Payment

For their work, employees receive a fixed salary every month, along with company benefits such as health insurance, food and travel allowance, and stock options. Additionally, the employer withholds taxes for the employees. They’re also protected against unemployment, discrimination, unfair work policies by the employment / labour laws and workers’ unions.

Independent contractors are paid a fixed compensation for their services. Once their work is done, they provide an invoice against services offered to the organisation that hired them and receive their payment. They aren’t entitled to any of the traditional company benefits and have to do their own taxes. They’re also not protected by any employment / labour laws. 

The Expertise

Most employers provide some form of training to their employees so that they can perform their duties well. They are also provided training as and when their job role changes. While they are expected to be skilled for their job roles, they aren’t required to be experts at their tasks and are given ample room to learn while on the job.

Independent contractors are hired for their expertise on a particular project or industry. Businesses aren’t required to provide them with any sort of training as these contractors demonstrate a high level of specialization in their respective fields.

Employees and independent contractors have their own pros and cons. Understanding the differences between these two roles and your business needs is key to making the right hiring decision, and International Manpower Resources can help you with that

Job Seekers Employers