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Human Resources Q & A

Published on November 16, 2018 10:29AM


This column is sponsored by the Lower Columbia Human Resource Management Association. LCHRMA represents a gathering of Human Resources professionals. Join them each month for a luncheon and training that covers many aspects of employment law and human resources.

• Wednesday Oct. 3, 11:30 a.m. to 1 p.m.

“Own Your A-Game” — Diane Allen

Fort George Brewery, 1483 Duane Street Astoria

• Wednesday, Nov. 7, 11:30 a.m. to 1 p.m.

“Leadership for the 21st Century: How Can I Work Best With You?”

Alan Cabelly Portland State University

Fort George Brewery, 1483 Duane Street Astoria

Register online. www.lchrma.org


HR Questions and Answers:


Ethics is knowing the difference between what you have a right to do and what is right to do.

— Potter Stewart, U.S. Supreme Court Justice

Q. What is the difference between an independent contractor and an employee?

A. Businesses are often confronted with the challenge of hiring an outside contractor to complete work that could be done by an employee. In fact, a business may pay an independent contractor or what is also being called a “gig” worker and an employee for the same or similar work, but there are important legal differences between the two.

For the employee, the company withholds income tax, Social Security, and Medicare from wages paid. For the independent contractor, the company does not withhold taxes. In addition many employment and labor laws also do not apply to independent contractors. Critical tax consequences and penalties occur when a company mistakenly uses an independent contractor status instead of employee status. To determine whether a person is an employee or an independent contractor, the company weighs several factors to identify the degree of control it has in the relationship with the person. The factors become critical if ever the IRS questions a company about an independent contractor that should have been classified as an employee.

Factors considered:

• Control over work decisions, work times and work methodology. The employee is under strict oversight of a supervisor who dictates much of the above. An independent contractor has a specific job task or “gig” to complete and usually sets the way it will be completed, the timetable and the termination of the project.

• When a company controls the business aspects of the worker’s job such as how the worker is paid, whether expenses are reimbursed, and who provides tools and supplies, the worker could very well be classified as an employee.

• When there is a written contract for a discreet project or task to be completed, it is most likely an independent contract relationship.

• If an independent contractor works exclusively for a company, the IRS has concerns that the relationship is actually an employer-employee relationship such that taxes, workers’ compensation and Social Security contributions should be withheld from the money paid the worker (a test question: does the independent contractor have work with other companies throughout a year rather than working solely for one employer?).

• Does the worker receive employee benefits such as a pension plan, insurance, or vacation pay? If so:

• Will the relationship continue and is the work a key aspect of the business?

• Independent contractors invoice for pay; employees are paid at regular and specific dates.

• Employees receive W-2 forms reporting all withholdings for the year; independent contractors receive 1099 reporting payment of $600 or more during a calendar year. the company must request from a contractor a W-9 form.

Disclaimer: No response to the above queries is intended as legal advice. The answers are general answers based on general questions. If you need legal advice, please consult an attorney.



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