Question

A significant percentage of workers in the health and fitness field are neither full- nor part-time employees but are independent contractors. Identify and discuss the advantages and disadvantages of using independent contractors

Answer 1

It is very important for a business to clear distinction between its employee and independent contractor business may have hired on contract. A business needs to pay an independent contractor and an employee for the same or similar work, but there are important legal differences between an independent contractor and an employee of the business.

For the employee of the business, the company withholds income tax, Social Security, and Medicare from wages paid on a regular basis to the employee. On the other hand for the independent contractor hired by the business, the company does not withhold taxes. Employment and labor laws of the state also do not apply to independent contractors of the business.

In order to determine whether a person is an employee of the business or an independent contractor business, the company weighs many key factors to identify the degree of control it has in the relationship with the person. Some of these key factors are:-

• Does the business have the control or have the legal rights to control what the worker does and how the worker does the job assigned by the business?
• Does the company has the legal rights to control the business aspects of the worker's job routine? These include arrangements like how the worker is paid by the business, whether expenses are reimbursed or not, and who provides tools and supplies for day to day requirements of the job done by the employee or the independent contractor.
• The business also needs to identify whether there exist a written contract or employee benefits such as a pension plan, insurance, or vacation pay being paid to the employee or the independent contractor.

Now let us discuss the advantages and disadvantages for the employee or independent contractor of the business.

Advantages of independent contractors:- Following are the advantages of the independent contractor:

1. Independent work

2. No Tax Withholding

3. Deducting Business Expenses

Disadvantages of independent contractors:-

1. No Guarantee of Income

2. Paying Business Expenses by self

3. No Benefit Plans

4. Still eligible to pay taxes