Many people in New Jersey and Pennsylvania are classified as independent contractors. Independent contractors are typically people who are able to work from anywhere at times that they choose. They are able to use their own resources and tools and work for several companies. Often, they are paid flat fees or by the project. Employees are people who work set schedules at locations that are chosen by employers. Normally, employees only work for one employer and are paid an hourly wage or a salary. Swartz Swidler is able to help people understand the difference between independent contractors and employees and to determine whether they might have been misclassified.
Differences between an independent contractor and an employee
It can sometimes be difficult to determine whether someone is an independent contractor or an employee. However, there are several features of each type of work that can help you. Employees work at locations that are selected by their employees at specific times. They normally work for only one company and use their employers’ work resources and tools. The work of employees is largely controlled by their employers, and they are normally paid an hourly wage or a salary.
By contrast, independent contractors control their own work and are able to work when they want and from where they want. They are also able to work for several different companies and use their own resources and tools to complete their projects. Independent contractors are frequently paid on a per-project basis or with a flat fee.
These differences are important for a few reasons. Employees may be eligible for employment benefits that are not available to independent contractors. Employees also have their taxes taken out of their paychecks and have withholdings for Social Security and Medicare while independent contractors are responsible for paying self-employment taxes. Employees are allowed to join unions, but contractors cannot. Employees are also protected against employment discrimination and may be eligible for overtime pay while contractors are generally ineligible for these protections.
Why proper classification is important
Some employers purposely misclassify workers as independent contractors in order to avoid paying payroll taxes or providing them with benefits. However, the law determines which workers are independent contractors and employees. Employers who misclassify workers can be liable to pay back taxes. Improperly classified workers may also be able to file unemployment claims at the end of their contracts and claims for overtime pay that they are owed. Employers who misclassify workers may also face substantial fines and penalties.
Employers should make certain that they classify their workers correctly from the beginning using the definitions that the IRS provides. If you believe that your employer has misclassified you as an independent contractor, you may have legal rights. Schedule a free consultation with Swartz Swidler by filling out our online contact form.