An independent contractor is a person or a business that performs services, produces outcomes, or produces products for a business under a written or implied agreement or contract. The independent contractor is not subject to the client's control or direction, except as stated in a contract.
The independent contractor decides how to provide the contracted services and negotiates deadlines and deliverables. The independent contractor determines his hours of work, work site, and equipment.
The independent contractor pays his or her own taxes and Social Security. The independent contractor provides the contracted services independently, not as an employee.
The business that engages an independent contractor is not liable for the acts or omissions of the independent contractor. Another test of the status of an independent contractor is whether they perform work for more than one business; the independent contractor should.
According to the Internal Revenue Service (IRS):
Factors that provide evidence of the degree of control and independence of the contractor fall into three categories.
- "Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- "Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- "Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?"
If an employer can answer these questions appropriately, the relationship with the independent contractor is not an employment relationship. Rather a contractual arrangement exists.
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