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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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Independent Contractor vs. Employee

What is the difference between an independent contractor and an employee?

Independent Contractor vs. Employee refers to the difference between the two main types of worker. This is a distinction that impacts taxation, benefits, and legal responsibilities — most significantly because employers are responsible for paying taxes on employees while independent contractors handle their own.

The main difference between independent contractors and employees is that employees work under an employer’s control and direction while independent contractors have a higher degree of autonomy over when and how they work. This means that contractors don’t receive benefits such as health insurance, retirement plans, or paid time off and often have their own tools and equipment.

Correctly distinguishing between employees and independent contractors is essential to avoiding legal trouble. If someone that classifies as an employee is treated as an independent contractor, this is known as disguised employment and employers can face fines for not properly paying benefits and tax and complying with labor regulations.

To stay on top of employee classification and avoid these issues, it’s best to use an HR service such as Multiplier. We undertake tests that consider every aspect of the relationship to ensure that all workers are managed and paid correctly.

Ready to take the leap? Choose Multiplier as your EOR partner

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