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How do employees and independent contractors differ?

It’s important for workers in Missouri to understand classifications when it comes to employees and independent contractors. How you’re classified influences things like payment schedules and taxes, and it’s imperative that employers abide by the rules to remain in compliance with pertinent wage and hour laws.

According to the U.S. Department of Health & Human Services, there are several criteria used to determine a business relationship. Hiring practices usually differ greatly between employees and independent contractors. An independent contractor is retained by a company to complete a task or assignment. This entails entering into a contract that specifies the extent of work and what’s required of the contractor.

Conversely, an employee completes an application that is submitted to a business’s human resource department. If the employee is hired, he or she will provide subsequent information concerning marital status, birth date, and citizenship. The employee will also need to fill out a W-4 for tax purposes. Employers are required to withdraw state and federal taxes on a worker’s behalf, while independent contractors are tasked with withdrawing their own taxes from their income. Contractors report their income on a 1099 form, while employees use a W-2.

How and how often a worker is paid also differs quite a bit. Employees typically earn a salary or an hourly rate. They can be paid once weekly, bi-weekly, semi-monthly, or once per month. Regardless of pay period scheduling an employee must be paid as specified unless the employer enacts a formal change. A contractor can be paid according to a schedule for the duration of an assignment or pay may be remitted once all work has been completed. In order to receive pay, an invoice is usually submitted on behalf of the contractor. 

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