Independent contractor

An independent contractor provides services under a contract without being treated as an employee of the hiring party. The distinction affects control over work and responsibility for taxes, benefits, and legal protections.

Employee: A worker who performs services within an employer’s organization under an employment relationship. Employees generally receive workplace protections and benefits that do not automatically apply to contractors.
Common-law control test: A legal test that weighs a hiring party’s control over how a worker performs services. Control over methods and details is a central indicator of contractor status in many settings.
Self-employment tax: A tax on income from self-employment that generally covers social insurance contributions. Contractors often pay these contributions directly rather than through employer withholding.
Employment benefits: Non-wage compensation such as paid leave, health coverage, and retirement contributions. Contractors usually must arrange and fund benefits without an employer’s benefit plan.
Contract: A legally enforceable agreement that creates obligations between parties. The service agreement sets terms, but its label cannot alone establish worker status.
Employee misclassification: The classification of a worker as self-employed when the law treats the worker as an employee. Disputes arise when a contract’s label conflicts with the actual working relationship.
Economic realities test: A legal framework assessing whether a worker depends economically on a business or operates independently. Economic dependence can outweigh a contract that calls the worker an independent business.
Form 1099-NEC: A United States tax form businesses use to report certain payments for nonemployee services. It reports payments but does not itself determine whether a worker is legally a contractor.
Unemployment insurance: A public program providing temporary income support to eligible people who lose work. Contractor status commonly excludes workers from employee-based unemployment coverage.
Self-employment: Working for oneself in a business or profession rather than as another party’s employee. Independent contracting is one common way to earn income through self-employment.

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