You fall on some slippery flooring at work and break your hip. You're completely out of commission-unable to work, and unable to do much of anything. So you contact your boss about filing a workers' compensation claim. To your shock, your boss responds that you're not eligible-since according to them-you're not an employee at the company at all, but an independent contractor.
How your employer classifies you is important-and it's to their advantage to classify you as a contractor. An employer's responsibility to an independent contractor is different than to an employee. Under the law, independent contractors are not entitled to workers' compensation or a wide range of other benefits-including overtime pay, paid time off and health insurance. Therefore, hiring contractors instead of employees can save an employer a lot of money-and liability in case of workplace injuries.
However, it's not at the employer's discretion to decide whether you're a contractor or an employee. The classification is not based on whatever job title appears on your business card or your work contract. This determination is not haphazard-it's defined by law. And if an employer misclassifies you as a contractor when you're really an employee, you have a right to pursue legal action to get the benefits you deserve.
So what's the real difference between a contractor and an employee? Sometimes the job of an employee and that of a contractor can look pretty similar-and there can be some overlap in the traits described below. But generally, a contractor position has the below qualities:
- Skill: A contractor is typically hired for a unique skill set that none of the regular employees possess. Therefore, a contractor usually doesn't undergo any company-provided training.
- Independence: A contractor has the freedom to decide where to work, when to work, and the best manner of achieving their project's goals. If a supervisor oversees a worker's tasks or dictates how a project be completed, this would be an indicator of an employer-employee relationship.
- Duration: An independent contractor is often hired to complete a specific project, and their employment is only temporary.
- Payment: One core difference between contractors and employees is how they get paid. Employees usually receive payment spread out over fixed intervals-either as a salary or an hourly wage. Contractors, on the other hand, are usually paid in a lump sum per project.
- Equipment: A contractor typically has to provide whatever equipment or materials are necessary to complete the job at their own expense.
Misclassification of employees as contractors is a pervasive problem in the U.S. Some estimates show that as much as 30 percent of employers inaccurately classify their workers in this way. Whether deliberate or not, this mistake can cost workers dearly.