With the economy and the job market not doing quite as well as we would like, it’s understandable that companies are doing anything and everything they can to save as much money as possible. Perhaps they are cutting back in the department they need the least. Perhaps they are minimizing the bonuses they usually give. You may see less employee rewards or benefits, or maybe the position they were looking to fill will just be phased out. These are common actions that everyday companies take to cut back on their costs. They’re not the best or most appealing, but they certainly happen and they are legal. However, a company may take some other actions that aren’t quite as legal such as hiring employees under independent contractor status.
If you’ve ever worked as a freelancer, then you are probably familiar with the term independent contractor. The company you write or design for gives you the task you need to complete, you complete it and you get paid to do so. The difference between an independent contractor check from an employee check though is that the company does not take taxes out of the check. As an independent contractor, the responsibility is on you to pay your taxes; the company does not do it for you. Why would a company opt to have independent contractors rather than employees? There are a number of different reasons companies may want to hire independent contractors instead of full-on employees. If a company has a small, temporary job that simply requires work from one or two people that do not have to be in the office, then hiring a person as an independent contractor is economically sound.
Perhaps they need someone to spruce up their company’s design and that’s it. It would be pointless for them to hire a full-time designer just so they can revamp their company logo. That is why it makes more sense for them to bring a designer on as an independent contractor. The job is temporary, the designer doesn’t have to be in-house and it’s likely the designer is using their own equipment. These are all signs that point to independent contract work. According to the IRS, an independent contractor supplies his or her own equipment, materials and tools; can be discharged at anytime and can choose whether or not to come to work without fear of losing employment; can control the hours of employment thus indicating they are acting as an independent contractor; and the work is temporary.
If you are an independent contractor and these things apply to you, then you and your company are on the right track. However, things get a bit messy when employers bring new hires on as independent contractors but treat them as employees. This brings us to the next reason a company would bring new hires on as independent contractors: it’s cheaper for them. If a company is hiring independent contractors, then they do not have to pay state and federal unemployment tax, they don’t have to pay social security taxes and they also skip out on worker’s compensation premiums. What does that mean for the company? More money. If a company is hiring employees, they have to pay all of these taxes and that means more money is coming out of their pocket.
When the budget is tight but the work still needs to get done, it can be very easy for a company to bring new hires on as independent contractors to save a couple bills. However, this is illegal practice and is not something that should be tolerated. That is why you must be aware of the difference if you are signing on to work at a new company as an independent contractor. Are you truly an independent contractor or is the company classifying you as such but still treating you as an employee? Are you an independent contractor but must be in the office between this time and this time? Is your superior dictating to you on how to do your job? Meaning, are you able to receive the task and complete it the way you want or do you have specific directions on how to complete this task? Is your main source of income coming from this one company? Answering these questions will tell you whether you are wrongfully classified as an independent contractor or not.
Even though companies all over the pace are getting away with this, that doesn’t make it right. It’s tough out there for everyone and just because companies can save a couple bills doesn’t mean that they can exploit their workers like this. As an employee, you have certain rights and certain benefits. If you are working as an employee, then you deserve to receive them.
Are you working as an independent contractor but are being treated as an employee? Tell me about it in the comments or tweet me @nicole_spark.