First, simply calling someone an “independent contractor” instead of an employee does not make it so. Misclassifying an individual can carry serious consequences, including tax liabilities (for failing to withhold taxes), liability for injuries outside of the workers compensation system, unemployment penalties, and civil lawsuits for failing to pay overtime and benefits. To make matters more difficult, it is not always easy to decide if someone is an employee or an independent contractor.
Certain factors are common in determining whether an individual is an employee or a contractor:
The amount of the employer’s control over how the individual does its job
The financial contribution by the employer versus the individual
The extent to which the services performed are an integral part of the business
The degree of the individual’s independence in performing the job
The individual’s opportunity for profit and loss
The foregoing are just a few considerations, and different government agencies (and the courts) use different tests.
In light of the foregoing, the decision as to whether to hire someone as an employee or an independent contractor is often dictated by the business needs. For example, if you need to supervise the individual closely, establish set work hours, and provide them tools and equipment to do their job, then that individual is most likely an employee.