{"id":4668,"date":"2016-04-04T10:47:37","date_gmt":"2016-04-04T15:47:37","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/smallbusiness\/employment-law-and-human-resources\/be-careful-when-hiring-a-contractor.html"},"modified":"2024-06-06T05:11:20","modified_gmt":"2024-06-06T10:11:20","slug":"be-careful-when-hiring-a-contractor","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/smallbusiness\/employment-law-and-human-resources\/be-careful-when-hiring-a-contractor.html","title":{"rendered":"Hiring a Contractor: What To Know"},"content":{"rendered":"\n
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Hiring a Contractor: What To Know<\/h1>\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Aviana Cooper, Esq.<\/a>\n | Last updated\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

Small businesses rely on independent contractors for almost everything these days. Whether you need someone for a specialized job or an on-call driver, independent contractors are there to fill the need. Small business owners must be careful when hiring independent contractors to avoid trouble with the IRS later.<\/p>\r\n

Although it seems simple enough, hiring freelancers for work rather than hiring employees is different, according to the Internal Revenue Service (IRS)<\/a> and Equal Employment Opportunity Commission (EEOC). Even if they do the same thing, they are different types of workers. If an employer makes a mistake, known as misclassification, they can find themselves in very expensive trouble.<\/p>\r\n

This article discusses how hiring an independent contractor differs from hiring employees and how to avoid misclassification errors. It also gives tips on what to do in case of a misclassification audit.<\/p>\r\n

Visit FindLaw’s Hiring Process<\/a> section for other articles and resources to guide you through the hiring process.<\/p>\r\n

Hiring an Independent Contractor<\/h2>\r\n

When you hire an employee, you have certain expectations. Your employee works for your business. You have a high degree of control over your employees. You set the schedule, although your employees may have some input about their shifts. Your business may have a dress code, or employees must wear uniforms. You must follow federal and state laws regarding employee benefits and workers’ compensation.<\/p>\r\n

The independent contractor relationship is different. Employers hire contractors for a particular business need or for a set period of time. Contractors are self-employed and handle their own taxes. You may have some say over when and how a contractor works, but usually the contractor sets their own schedule and performs their tasks on their own time.<\/p>\r\n

An independent contractor is not a temporary worker. Temporary workers are employees of the temp agency. The agency hires them, pays their taxes and schedules, and may provide benefits. Temp workers may come in part-time or full-time to an office, but they are not contractors.<\/p>\r\n

Keeping contractors separate from employees means employers must take a few extra steps during hiring. You may want an independent contractor agreement. These contracts are separate from regular employee contracts and define the contractor-employer relationship. Although the IRS does not consider a written contract absolute proof that a worker is an independent contractor, it is a good first step in the event of an audit.<\/p>\r\n

An agreement or contract should also spell out:<\/p>\r\n