Have you ever wondered what made someone an independent contractor? Have you ever thought about the difference between an employee and an independent contractor? In this article, I want to briefly describe the difference between the two and to explain why it matters.
According to the tax laws, whether you're in the United States or the United Kingdom, there are three criteria that define these two types of workers: 1) who determines what you do; 2) who determines when you do; and 3) who has the authority to make financial decisions about how many is spent in the enterprise.
Who determines what Let's look at the first one: Who it is who determines what you do.
As recently as 25 years ago, the majority of workers were told what to do by their supervisors.
In many cases they were also told how and where to do it.
In recent years, this has changed as employees have been given greater autonomy.
Now they're expected to do what is required in their estimation to get the job done.
Employers refer to this as, "thinking and behaving like an entrepreneur.
" Who determines when Traditionally, supervisors told employees when they should come to work by using schedules, and verified their attendance with time clocks.
In many places, normal working hours were from eight in the morning to five in the afternoon.
Others worked some combination of a 24/7 shift pattern.
Some years ago, companies began to use flex-time in which workers could decide when to come to work and when to leave.
The stipulation was that they had to be there during certain core hours.
Today, the presence of people on the job has become even more flexible.
Now it's possible to work from home.
No matter when the work is done, the employee works when he or she feel like doing so; consequently, many tele-workers, so-called, are more productive in these circumstances than they would be if they "went to work.
" Who makes the financial decisions Of the three criteria, this is the most difficult one for people to overcome to be a true independent contractor.
Many people can choose what to do, how and when, but do not have the authority to spend the company's money without getting okay from someone higher up.
Some companies will authorize purchases involving petty cash or items below a certain amount, but that seems to be the extent of their buying power.
What organizations will not do is allow you to spend whatever you want on whatever you want, even if you have a budget.
That said, these responsibilities are being devolved more and more all the time, partially because people are spending their own money to get the equipment they want.