Employee versus Contractor

The biggest factor in assessing whether an individual is an employee or contractor comes down to control.  If a company can dictate hours and schedule, the person is more likely to be an employee.  Does a worker wear a shirt with your company’s logo on it while visiting clients?  Then they are likely an employee.  Here are a few other guidelines. Control: Does the hired person work directly under the orders of others in a defined position? They are most likely an employee. However, if the person works separately on specific projects with little to no supervision or time constraints, they are more likely to be a contractor.

Reimbursement: An important difference between a contractor and an employee is the method of payment for services provided. If the paycheck is constant and includes benefits such as a pension plan and vacation days, the person involved is an employee.

Importance: The proximity of the hired person to your vital operation is a good indicator of hired status. Is the person working on a direct part of your business model required to complete the process? Are tools provided for the job? If so, the hired person is most likely an employee.

The difference between an employee and a contractor has important tax repercussions, and should not be ignored. For more information, read information provided by the IRS here.

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.