Hiring and Paying an Independent Contractor
Many small business owners prefer to work with independent contractors rather than hiring employees. Benefits to hiring independent contractors include:
- Flexibility in being able to vary hours worked, or paying by project, and not having to pay when work isn t available.
- Outsourcing non-essential tasks, like IT and maintenance, so you don t have to set up a new department within your company.
- Being able to terminate the relationship easily without the paperwork and potential problems that go with firing an employee.
- Not having to pay FICA taxes (Social Security and Medicare) in terms of taxes, benefits, and agreements. But you must still have a contract (not an employment contract) and there is still paperwork you must complete and taxes that must be allocated.
- Less hiring paperwork, fewer reports and payments to the IRS.
But, as the hiring employer, there are still some things you must do to hire that independent contractor and start paying that person.
An independent contractor is an individual who does work for another individual or company. The contractor is, by definition, independent, and not an employee of the hiring company.
A perfect example of an independent contractor is a cleaning service. The service comes into your office to do work, but the cleaning service workers are not employees of your company.
Independent contractors are considered to be business owners. They report income on their personal tax returns and they can deduct business expenses. More