Legal Differences Between Employees and Contractors

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LEGAL DIFFERENCES BETWEEN EMPLOYEES AND
CONTRACTORS
Presented By Kimi Esteban
The Cut Jenstone 2024
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Understand the key legal differences between
employees and independent contractors. Their
roles, responsibilities, tax obligations, and how
they are paid. Understanding the legal
differences between employees and contractors is
about more than semantics. If employees and
contractors do not understand their
responsibility. Then your organizations can land
in hot water. We have seen this in landmark
employment tribunals. One of the most prominent
examples of this is Uber. They went to court
after misclassifying workers as
self-employed. So, what is the difference between
a contractor and an employee? How can
organizations treat their workers fairly and
avoid legal action?
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THE DEFINITION OF EMPLOYEE OR CONTRACTOR
The differences between contractors and employees
can present some semantic arguments. For example,
according to the UKs HMRC An independent
contractor works for a client under a service
contract. On the other hand. An employee works
under a service contract. See how only two small
words can make all the difference. But theres
more to it than that. To distinguish an
independent contractor vs an employee. We would
look at the persons role within an organization
with legal templates .
Larana University 2024
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WHAT IS THE DIFFERENCE BETWEEN EMPLOYEE AND
INDEPENDENT CONTRACTOR?
Lets look at how you might define each role
separately. The role of an independent contractor
agreement typically comprises working on a
specific task or project. They do not have an
employment relationship with the company. This
means they have more freedom over what they do.
But still, they are doing your work and are
responsible for delivering a product or
service. They may have a particular skill set. As
they are on contract. They can work for a
specific time period. For example, for the
duration of the project. The most important
difference between an independent contractor and
an employee is that. Independent contractors have
the right to substitute themselves for somebody
else. For example, an employee in the
contractors own business.
Larana University 2024
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THE ROLE OF AN EMPLOYEE
An employee has less autonomy than a contractor.
They are employed. And they are answerable to
their line manager. They are contracted under
certain hours (though this may be more flexible
with some employers than others.) Lastly, they
work under the guidance of their manager with
legal templates.
Larana University 2024
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WHAT ARE THE PENALTIES FOR MISCLASSIFICATION?
If you dont classify workers correctly. You may
find that there are several potential
consequences. These might be financial losses
from fines or penalties or breaching employment
law. It can also face reputational damage for
treating workers incorrectly. In severe cases can
lose licenses or regulatory approvals. So my
advice is to have a legal template in your hands.
They are customizable. This means you can change
the data in the way you like to. So if you are
working with a contractor then do use an
independent contractor agreement. So what do we
know now? Working with an independent contractor
is often a good idea. You can classify them
correctly without risking penalties.
Larana University 2024
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INDEPENDENT CONTRACTOR VS EMPLOYEE THE KEY
DIFFERENCES
There are several things to consider when looking
at the differences between contractors and
employees. Working practices How are the working
practices defined? For an employee, you will set
specific working hours per week. You can also
have a total number of hours per day. Yes, you
will have control over day-to-day schedules. Most
of the time youll have to provide an office for
the worker. But remote working is also increasing
with help of legal templates. On the other hand,
An independent contractor will usually work on
their own schedule. It can be remote and on a
short-term basis. The contractual worker
status. Do you have a contract in place?
Employees receive a written contract following
employment law. It covers many legal and working
issues. With a contractor, you may have no
contract at all. Independent contractors run
their own businesses. In this case, both parties
have fewer protections in a contractor
relationship.
Larana University 2024
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HOW AND WHEN YOU PAY
Next, consider how you pay the worker. Employees
usually agree on a yearly salary or hourly rate.
Their wages and pay should be according to laws
around remuneration including minimum wage.
Employees compensation is generally paid at the
same time regularly. However, this depends on
the laws of the country. In some countries labor
laws, the specific date of payment is
defined. Contractors payments will be whatever
is agreed with the client. It is usually defined
in a contract.
Larana University 2024
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HOW YOU MANAGE TAXES

• Are you involved in the workers tax affairs? In
  many countries, employers will manage their
  income tax, national insurance, and other
  employment tax contributions. In others, such as
  Hong Kong and Singapore, employees have to submit
  their tax returns. An independent contractor
  manages their own taxes.
• The benefits you provide
• Are there any benefits for the worker? For
  employees, benefits range from
• Pension plans
• Health insurance
• Childcare allowance
• Professional development
• Fitness or health and lifestyle incentives
• Flexible and remote working options
• Life insurance.
• Legal Templates

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THE EQUIPMENT YOU PROVIDE
Do you provide the worker with equipment to do
the job? For example computing equipment for them
to work. This can also include office space. This
means employees can use them. The independent
worker will usually provide their own equipment.
As being independent they often work offsite.
Have help independent contractor template?
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HOW YOU MANAGE THE SCHEDULE
Do you set the work schedule? In an employment
relationship, you can control an employee's daily
schedule. You can select working hours with an
arrival and finish time. Independent contractors,
on the other hand, are their own business owners.
So they usually work according to their own
schedule.
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HOW YOU MANAGE EXPENSES

• Finally, how do you pay business expenses?
  Employees use a company card to cover expenses or
  pay out of pocket. Normally reimbursement is
  included with their regular paycheck.
• An independent contractor has their own small
  business. He/she will run business expenses
  through it. When working for a company, sometimes
  there is a legal agreement that contractors can
  claim some expenses. They will invoice the
  company for business expenses.
• Employee or contractor?
• After discussing everything now we will see the
  differences between employees and independent
  contractors
• If you provide any equipment, benefits, or
  support.
• How much control you have over schedules
• How and when you make payments

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