Companies attempting to keep costs low may consider recruiting independent contractors instead of permanent employees.
While the notion may seem attractive on its face, however, anyone responsible for recruiting talent should understand the critical differences between the two before choosing which to recruit.
Conflating the two, even inadvertently, can lead to greater costs to the company in the long run.
As we “celebrate” tax season, arm yourself with the knowledge about which type of worker is which.
If you are not sure whether you should be recruiting an employee or an independent contractor, you can evaluate the open position based on the following general descriptions that are based on the IRS’ common law rules for classifying workers*:
Classifying a worker as an independent contractor shifts the responsibility of tax withholding and reporting from the employer to the worker and exempts the company from payroll tax liability for that worker. However, if the IRS determines that a worker has been improperly classified then the company may have to pay penalties in addition to taxes going forward.
There are specific pros and cons to recruiting employees versus independent contractors, many of which are discussed above. The most important distinction between the two, though, is a company’s responsibility for proper reporting and payroll administration – which is why it is essential to know the difference. If you are recruiting for “independent contractor” positions that sound more like “employee” positions, you can save your clients money and frustration and make yourself an invaluable asset to their recruiting team.