Human Resource Management: Employees Vs. Independent Contractors Chapter

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Employee vs. Independent Contractor

Employees vs. Independent Contractors

John, who owns his own consulting firm, is picked to work for Make-a-Bed, a furniture manufacturer and distributor, and since he is not readily available as a full time employee, it is agreed that he should work as independent contractor. He is expected to study the business and make recommendations accordingly, to arrange for his own travel and meetings, dedicate about 20 hours each week to the project, and is to be paid on an hourly basis after presenting an invoice. However, the other businesses John deals in become a cropper come and he ends up dedicating more of his time to Make-a-Bed. After one year has passed and he has not made recommendations, John is replaced with another consulting agency and he attempts to claim unemployment benefits with Make-a-Bed as the last employer.

In court, John refutes any claims that he agreed to work as an independent contractor. He testifies that he notified the Human Resource Department (HRD) any time he would arrive early or late, he worked for normal business hours, and even had an office assigned to him by the company. His checks were also issued from the business payroll account. On the other hand, the company claims that John worked for extra hours for security reasons, he had an office due to access to the business computer system, and that he was not required to give any notifications to HR. Furthermore, he does not receive any employment benefits.

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According to the Internal Revenue Service, IRS (2015), it is imperative for employers to establish the business relationships that exist between then and persons performing any given service. The IRS claims that individuals can either be employees or independent contractors. In the case of employees, the employer must withhold or pay federal income, Medicare and social security taxes, and also pay unemployment tax on their wages. For independent contractors, employers do not have to pay federal taxes on payments. To determine whether an individual should be treated as an employee or an independent contractor, all the information that shows evidence of the degree of independence and control should be put into consideration. The IRS (2015) states that the facts that show this evidence are classified into financial control, behavioral control, and the relationship that exists between the parties

Behavioral control presents facts that show exactly who has control over the business, the individual or the employee. For the employees, the employer gives specific details of how work should be carried out while for independent contractors, instructions on how the work should be carried out are not give (IRS, 2015). Employees are also trained while independent contractors are left to rely on their own expertise. Financial control entails the payments that exist between the employer and the individual. They include (IRS, 2015):

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