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Guide to Independent Contractors: What Clients Should Know

what independent contractors can do that can help avoid any confusion for the employers and workers.

By Vasiliki GreecePublished 2 years ago 5 min read
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THE GIG ECONOMY IS HUGE! Now in recent years, due to the rise of online platforms like Upwork and Fiverr among many other sites, people are finding jobs that help them pay the bills. The jobs may not be as frequent as one may like to but for a worker who wants flexible working hours? This is the real deal.

Sometimes multinational organizations also post a gig online that catches the attention of several freelancers looking for a new job. Companies are always looking to scuttle the worker-related expenses to lower the taxes. At this point, the freelancer hired becomes an independent contractor instead of a full-time employee.

In this article, we will cover basic guidelines about what independent contractors can do that can help avoid any confusion for the employers and workers.

What is an Independent Contractor?

Professionals working as freelancers offering their skills, efforts, and time to qualify for certain task completion are independent workers. As a contractor, you may work as an individual or even lead a team of your own.

Independent contractors or freelancers are not just side hustlers anymore. The guidelines are becoming more prominent in terms of specific taxes and job responsibilities.

Consider it this way, independent contractors are the free spirit of an entrepreneur who has gained expertise over the years. Instead of working as full-time employees they rather prefer to work with a flexible schedule.

However, the downside (if you consider it that way) is that clients are not responsible to provide an employee benefit. But it also gives them less control of the project. Independent contractors complete the tasks as they see fit.

Independent contractors are subject to self-employment taxes (in addition to their income tax). They are eligible for Form 1099 for independent contractors.

Nowadays, some of the hottest professional freelancers has grown into;

  • Designers
  • Writers
  • Artists
  • Software developers
  • Real estate agents and so on

Battle of Forms: Independent Contractor vs Employee

An independent contractor is NOT an employee. They may be wrongfully referred to as Form W2 employees - but they are not. The job designation is not subject to the Form 1099 guidelines.

IRS has predefined the guidelines of differentiating between a regular employee vs independent contractor. Those guidelines will vary from work control to behavior and financial control.

Independent contractors are self-employees so they automatically fall out of the criteria of being W2 employees.

Also, they can be considered as sole proprietors (if they choose to be). The differences in form of taxes are prominent enough to avoid any confusion.

Why are Independent Contractors Important?

Being a much less complicated version of a more complex employee may be more fitting for several companies.

You need to them complete a job well. They do exist on the payroll as an employee does but they do not have involvement in the business which gives the companies some edge over control.

Independent contractors or freelancers work remotely from home, have their own equipment. So the expense of providing a desk and official space is not required. Some of the other advantages include;

  • Lower Costs

Freelancers are hired for the skills they offer for the specific task. It can be for a short-term purpose. So, instead of hiring an employee, companies can easily opt to lower the payroll in form of independent contractors.

Plus, no medical bills or insurance is covered by the business. So it leads to loads of cost savings.

  • Smart Skills

Companies looking to benefit from specialized skills just for a specific project can choose to work with independent contractors. Let’s say you want a graphic designer to create social media posts for 6 months period. After that, the project will wind up. You may contact the graphic designer for future projects if you’d wish to.

You may not need to find a freelancer again and again. Based on their availability you can either re-hire them or even ask them to share contact details for some other professional.

  • Job Flexibility

This advantage works in favor of the freelancer and company. Companies have the flexibility to do hiring per project and after task completion, they can dissolve the team. For freelancers, this means they can accept a job when they have enough time available.

Sometimes it happens that an independent contractor is working on 2-3 projects with a similar timeline so that passes the job offer. So you see? As the professionals and companies see it fit, they go for it.

  • No Training Expense

It’s important to highlight this factor. Hiring a newly graduated individual will take time and effort to polish their skills. An expert can do the job right away instead. Just provide them the project details and they are good to start working right away.

Saving training expense allows the companies to maintain their budget on other work priorities (like investments etc). The beauty of hiring a contractor is no training means time efficiency as well.

  • Limited Liability

Employees are the responsibility of the company. But such is not the case with a freelancer. A company can terminate the contract at the eleventh hour due to the right reasons without worrying about the technicalities.

A business is not liable for the damages or accidents that may occur during a job too. But even so, a business should always consult with a lawyer about federal liability.

Conclusion

Independent contractors are everywhere. Now even more than ever since remote work is fastly becoming one of the accessible ways to do jo. Hiring an independent contractor can benefit you or it may fall short of its purpose for some companies. Either way, it is important to understand who independent workers are and what they do.

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About the Creator

Vasiliki Greece

Remote Business Consultant, Creative Content Writer, Blogger, Vlogger, Traveler, and Philanthropist.

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