independent contractors
Definition
An independent contractor is a self-employed worker you hire to do specific work, rather than an employee you bring onto your payroll. You pay them for the job or project, and they control how and when they do the work, supply their own tools, and typically work for multiple clients at once. The IRS and state governments have strict rules about who actually qualifies as an independent contractor versus an employee.
Example
You hire a freelance graphic designer to create your new logo, you pay them a flat fee, and they work from their own home on their own schedule using their own computer. That person is acting as an independent contractor.
Watch Out
Misclassifying a worker as an independent contractor when they really function as an employee can result in serious tax penalties, back wages, and lawsuits that could devastate a small business.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.