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Independent contractor

Overview#

Independent contractor is a Legal Person that provides goods or services to another entity under terms specified in a contract or within a verbal agreement.

Independent contractor, unlike an employee, does not work regularly for an employer but works as and when required, during which time he or she may be subject to Law of agency. Independent contractor are usually paid on a freelance basis.

In the United States the distinction between Independent contractor and employee is an important one as the costs for Organizational Entity to maintain employees are significantly higher than the costs associated with hiring Independent contractors, in part due to United States federal government and state requirements for employers to pay FICA (Social Security and Medicare taxes), unemployment taxes, and often Health Insurance on received income for employees.

Likewise, employees are protected from being fired without cause, and if fired or let go for other reasons are entitled to unemployment benefits, whereas Independent contractors have neither protection nor entitlement. Employees are also entitled to receive overtime pay for work performed over the 40-hour-per-week standard, whereas Independent contractors may work any number of hours (including far above this standard) with no change in pay.

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