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The Difference Between Contract Workers & Employees

As an employer, you have the option to hire help either as an actual employee of the company or as a contract worker. Keep in mind that there are important legal differences between the two that all employers should be aware of.


An employee will be covered by all employment laws and are usually eligible for benefits such as paid time off, overtime and health insurance. All employees are required to have income tax, social security and Medicare withheld from paid wages. They are also responsible for filing a W-2 when it comes to tax time. An employer can determine if an employee is paid hourly or salary and they must be paid at the same time unless there are any formal changes made.

Contract Workers

All contract workers are required to have a contract in place with the employer. It should detail all of the terms like the job they are required to do, payment amount and form of payment. Contract workers are not covered under employment laws and are usually not eligible for benefits like employees are. Taxes and fees are not withheld from a contractor’s pay, as they are responsible for paying their own taxes and filing a W-9 when the time comes. Although, they only need to report earnings of over $600. The contract should always specify the total amount that the contract worker will be paid and will usually get paid once they submit an invoice.

If you are unsure if you should hire an employee or contract worker, MC Attorneys can help. Our experienced and skilled team will give you the legal advice you need to determine which is the best option for your business.

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