A Guide to Understanding Independent Contracting vs. Employee StatusPin it

As I survey social media posts from massage therapists, I find the topic of determining one’s work status, either as an independent contractor (self-employed) or as an employee is a popular inquiry.

The purpose of this article will be to define key terms and create a clear distinction between self-employed and employee status designations for massage therapists.

Save this article for future reference when employment status becomes questioned. I will use the term “working partner” to imply a company with which an independent contractor works.

The Internal Revenue Service (IRS) created a 20-item checklist (1) providing clarification to determine one’s employment status. We will summarize each item for clarity in this article.

1. Profit of loss ramifications.

Aside from money earned for labor, if you can profit or incur loss as a result of work either performed or not performed, you are an independent contractor. An employer has no vested interest (other than desiring to maintain employment) in the company’s overall annual profits or losses.

2. Investment.

How invested is someone in the equipment and facilities involved in the work? An employee simply shows up, performs tasks and leaves with no financial or tangible investment into the physical assets of the company. An independent contractor may choose to contribute to the facility to make their work easier with the working partner.

3. Works for more than one firm.

If someone has the liberty to work with more than one company, especially within the same industry, they are likely an independent contractor. Most states have laws preventing employees from working for two companies or more within the same industry field.

4. Services offered to general public.

Can a worker offer services independently to the general public or only within an individual company’s direction? An independent contractor can offer services to any working partners, even more than one simultaneously.

5. Instructions.

An employee must perform tasks under the direction of an employer regarding when, how, where and with whom work tasks are performed. An independent contractor may perform tasks at their own discretion and will.

6. Training.

Independent contractors are already fundamentally trained for work positions. There may be fine details when working with a particular company to learn, yet independent contractors do not need essential job training. Employees generally need training on rudimentary skills at a new location.

7. Integration.

The work of employees is essential to the business remaining open as opposed to the work of independent contractors, whose work is complimentary yet not critical to the operations of the business.

8. Services rendered personally.

If a worker must be physically present to provide services, they are likely an employee. These days, with the advent of online work options, this may be defined in terms of where the online presence takes place.

9. Hiring assistants.

Independent contractors hire and pay their own assistants without intervention. Employers can dictate to an employee a preference of assistance.

10. Continuing relationship.

An independent contractor can have an ongoing relationship with an employer which waxes and wanes with varying levels of involvement. An employee’s ongoing relationship is usually consistent on a weekly basis.

11. Work hours.

Work hours for independent contracting vs. employee

Independent contractors set their own hours or, at the least, agree upon set hours without inherit risks of being fired. Employees must work on hours agreed upon by the employer.

12. Full time work.

Independent contractors do not have an obligation to work a minimum hours per work weekly to earn income. “Full time” more so implies “job completion,” the number of hours it takes to complete a job/gig fully. Employees have a legal obligation to work a minimum hours per week to be legally “full time” status.

13. Work done on premises.

An independent contractor has more input on where services are performed, whereas an employee usually has no say in the proximity of services offered.

14. Sequence.

Independent contractors can determine the sequence and steps of work rendered as opposed to having these dictated by an employer.

This can include:

  • modes
  • timing
  • products used
  • and level of personal and/or equipment involvement

15. Reports.

An employee has more accountability with offering reports of work rendered, aside from standard payment invoices, than independent contractors who can decline to complete certain reports or demand extra pay for additional time to complete reports.

16. Pay schedules.

Independent contractors are usually paid by job/gig or via a commission system for services rendered as opposed to an hourly wage offered to employees.

17. Expenses.

Expenses for independent contracting vs. employee status

Independent contractors can negotiate terms related to expenses a working company partner may be willing to offer, yet a baseline expectation is that the contractor covers general expenses for their work rendered. These may include transportation and transaction costs.

18. Tools and materials.

Independent contractors generally provide their own primary and ancillary tools and materials to complete jobs.

19. Right to fire.

Independent contractors cannot be legally fired. Breaches of contract can be grounds for dismissal which falls under different employment law parameters.

20. Worker’s right to quit.

An independent contractor has a legal obligation to complete a job to complete a contract. Failure to do so has different legal ramifications than a simple firing.

As an independent contractor, ensure a contract is devised before taking on a job with a working partner. Many employers have never had training in employment law; therefore it is essential to review the above list line by line before accepting a job/gig with a working partner.

In Summary

If you are reading this article and pondering why your relationship with your working partner or employer seems different than described above, now is the time to discuss your arrangement for clarification. The aforementioned list provides guidelines to include in any contract created. Be sure to clarify in writing any amendments to your already agreed-upon work.

If necessary, consult a business attorney with future questions regarding particular details which may seem fuzzy within the finer details of a job. Never assume a working partner or employer is keeping your best interests in mind when interacting with you. Their allegiance is to their own company, first and foremost, just as your allegiance is to your company.