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Difference between revisions of "Employee"

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== Employee Vs. Contractor<ref>The Difference between an Employee and a Contractor</ref> ==
 
== Employee Vs. Contractor<ref>The Difference between an Employee and a Contractor</ref> ==
 
The IRS discusses several types of non-employees. These are individuals who work for someone else but are not employees. The most common type of non-employee is an independent contractor. Independent contractors are self-employed, and the relationship between the contractor and the employer is technically a relationship between two businesses. For example, if you work as a graphic designer for a company on a per-project basis, you are an independent contractor, not an employee.  
 
The IRS discusses several types of non-employees. These are individuals who work for someone else but are not employees. The most common type of non-employee is an independent contractor. Independent contractors are self-employed, and the relationship between the contractor and the employer is technically a relationship between two businesses. For example, if you work as a graphic designer for a company on a per-project basis, you are an independent contractor, not an employee.  
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[[File:Employees Vs Contractor.png|400px|Employees Vs. Contractor]]
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The IRS has an intricate system of determining the proper classification for a worker, but most businesses and workers can make the determination themselves. The IRS has common law rules to help guide those determinations. The common laws are broadly broken down into three categories: behavioral factors, financial factors, and the type of relationship.
 
The IRS has an intricate system of determining the proper classification for a worker, but most businesses and workers can make the determination themselves. The IRS has common law rules to help guide those determinations. The common laws are broadly broken down into three categories: behavioral factors, financial factors, and the type of relationship.

Revision as of 17:54, 5 March 2021

An employee is an individual hired by an organization or business owner to do a specific job.

According to the IRS "Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed." The IRS provides the following example:
Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. She works 6 days a week, and is on duty in Bob's showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager's approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Bob. Bob also pays the cost of health insurance and group-term life insurance for Donna. Donna is an employee of Bob Blue.[1]


The Three Part Test to Determine Employee Status[2]

When determining a worker’s status, you must consider your control over them. If you have great control over the worker, they are probably an employee. To help you examine control, you can use a three-part test from the IRS called common law rules. The three parts are explained below.

  • Behavioral control: Do you control or have the right to control what the worker does and how the worker does their job? If so, the worker might be an employee.
  • Financial control: Do you control the business aspects of the worker’s job? This includes things like how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies. If you control business aspects, then the worker might be an employee.
  • Type of relationship: Are there any written contracts or employee type benefits? These include things like retirement plans, insurance, and vacation and sick pay. Will your relationship with the worker continue? Is the work performed a key aspect of your business? If you answered yes to these things, then the worker might be an employee.

You must consider all three parts of the test. One factor doesn’t weigh more than the others. Also, there is not a set number of factors that a worker needs to meet to be considered an employee. For example, a worker might only meet two parts of the test and still be classified as a common law employee.


What Employees Do[3]

Each employee has a specific job to accomplish that is often defined by a job description. In responsible organizations, a performance development planning process defines the work of the employee and the organization’s expectation’s for the employee’s performance. It should also help employees set goals and track their performance. Additionally, the performance management system should help employees develop their ongoing skills and adopt a career path.

An employee works within a functional area or department such as marketing or Human Resources. An employee has a boss, the person he or she reports to and takes direction from, usually a manager or supervisor. An employee should have the expectation that he or she will receive reasonable, professional treatment from the manager. An employee also has coworkers who work with them to accomplish the work of the department.

The employee has a workstation or an office in which he or she accomplishes the job. The employer supplies the employee with the tools and equipment necessary to perform work such as a computer, telephone, cell phone, laptop, desk, and supplies.

In forward-thinking organizations, the employee receives frequent performance feedback from the manager, rewards and recognition, and a reasonable benefits package.


Employee Vs. Contractor[4]

The IRS discusses several types of non-employees. These are individuals who work for someone else but are not employees. The most common type of non-employee is an independent contractor. Independent contractors are self-employed, and the relationship between the contractor and the employer is technically a relationship between two businesses. For example, if you work as a graphic designer for a company on a per-project basis, you are an independent contractor, not an employee.


Employees Vs. Contractor


The IRS has an intricate system of determining the proper classification for a worker, but most businesses and workers can make the determination themselves. The IRS has common law rules to help guide those determinations. The common laws are broadly broken down into three categories: behavioral factors, financial factors, and the type of relationship.

  1. Definition of an Employee IRS.gov
  2. How is the Employee Status of an Individual determined? Patriot Software
  3. More About Employees and Their Jobs the balance
  4. The Difference between an Employee and a Contractor