Washington DC Independent Contractor and Employee Benefits

An independent contractor is a self-employed individual or an “employee” of another company that performs similar job functions of a standard employee, but with certain exceptions.

Many businesses use independent contractors to complete episodic or short-term projects instead of hiring full-time employees. Regardless, this relationship should be properly defined in an independent contractor agreement, or both the employer and the contractor may be involved in costly disputes.

Often, independent contractors and employees work side by side at the same company, even performing the same tasks, but there are very important legal differences between the two.

The differences go beyond a mere job title. The employment status of an independent contractor and an employee may affect issues such as employment benefits, and taxes. A skilled lawyer could assist you in understanding Washington DC independent contractor and employee benefits, and can also present any applicable legal options in situations where a claim may be filed. Get in touch with a seasoned independent contractor attorney today.

What Types of Benefits Do Independent Contractors and Employees Receive?

While the IRS, the Fair Labor Standards Act (FLSA), and state laws have all helped break down the differences between an independent contractor and an employee, the actual differences between the two may not be so apparent. The IRS generally assumes an employee/employer relationship, but the line can be ambiguous at times.

Businesses and companies are expected to pay a number of taxes on behalf of their employees, which include:

  • Social Security taxes
  • Medicare taxes
  • Premiums for workers’ compensation insurance and disability

Conversely, businesses do not need to pay taxes for independent contractors. Instead, contractors are subjected to a self-employment tax.

Some contractors feel it is beneficial to not have taxes withheld. However, federal or state income taxes and self-employment taxes are still paid by the contractors on their personal income tax returns.

An employee typically does not have the same ability to make deductions as an independent contractor when it comes to business expenses. While reimbursed employee business expenses are limited in deductibility, contractors can write off most business expenses within reason.

On the other hand, employees may be able to obtain better benefits than an independent contractor. Employer subsidized life, health, disability, and retirement benefits represent a “hidden” aspect for employees that independent contractors generally do not receive.

The Role of Proper Classification in Washington DC

Classifying workers is important because it determines if an employer holds income taxes and pay a variety of taxes. According to the Internal Revenue Services (IRS), the general rule behind classification is that an individual is considered an independent contractor if the business owner controls or directs the result of the work, not what will or how it will be done.

Businesses have an obligation to consider every aspect of control in the employer/employee relationship. Whether an individual is an employee or an independent contractor may depend on the facts of the situation.

Classifying an employee as an independent contractor for no legitimate reason can make the employer liable for financial damages. Furthermore, taking away important elements such as workers’ compensation benefits, protection of workplace safety and employment anti-discrimination laws, and employment benefits such as health insurance, can have a tremendous effect on the wrongfully classified employee.

Call a Lawyer About DC Independent Contractor and Employee Benefits

Being an independent contractor or an employee can each have pros and cons. Independent contractors can have additional flexibility and control over their work and do not have taxes withheld from their payments. Employees can receive a number of benefits such as health, life, disability, and retirement insurance, and also remain covered by federal and state wage and hour laws.

Washington DC independent contractor and employee benefits are handled by an assortment of complex employment laws. If you have questions or concerns about your classification status or are looking to understand more about employment law, call today.