If you start a new job, you might think that being an “employee” or a “contractor” is not all that different. However, employees and contractors have different rights that you need to be aware of. Continue reading to learn what your status with your employer means for you.
Employees and Contractors Pay Taxes Differently
An “employee” is often on a Form W-2 and taxes are taken out of their paycheck. This makes filing taxes easier, and the employer has paid part of the taxes on behalf of the employee. A contractor is often paid on a Form 1099, and they must pay self-employment taxes at the end of the year.
Employee and Contractor Benefits
Employees often receive benefits such as health insurance and retirement plans. Contractors do not. You need to be aware of what the company can offer you before you start working. Businesses often misclassify employees or only offer “contractor” positions as a cost-cutting measure.
What About Overtime?
Overtime rules for “employees” do not apply to contractors. Employees get “time and a half” when working their 41st hour and beyond. Contractors should ask for more money because you know that you will not get overtime, and you cannot expect your employer to suddenly pay you more because you worked more than 40 hours in a week, on the weekends, or over holidays.
Are You Getting Minimum Wage?
Contractors are not subject to rules concerning minimum wage. An employer can pay anything they want—at the same time, you can be a little bit more picky when choosing employers. If an employer does not pay well, you might want to avoid them. “Employees” get the security of knowing they cannot be underpaid.
Do You Even Get Breaks?
Contractors are also not subject to the rules concerning breaks and lunches that employees enjoy. Employees get that 15-minute break and an hour for lunch during an eight-hour shift. Contractors need to manage their time wisely so that they can take breaks.
How are Employees Classified During Hiring?
Job descriptions include the classification for each employee. Sadly, some employees or contractors do not read the documentation that comes along with the position. They might be shocked to discover that they are not covered by workers’ compensation insurance or have any benefits to speak of. This includes all the rules about breaks, taxes, and minimum wage.
The employer might have also misclassified the employee or changed their status without the employee’s knowledge. Someone who is working hard and gets their hours cut because of something like the COVID-19 pandemic cannot simply be “reclassified” by the employer. Even so, the employer might try it.
Speak to a Lawyer if Necessary
Because the rights of an “employee” and “contractor” are vastly different, everyone working in California needs to understand their role with their employer before signing a contract. You might enjoy the freedom that you get when you are working as a contractor, but you might prefer the security that comes from a full-time job as an “employee”. The choice is yours, and you should speak to an employment lawyer before signing your contract.