The Difference Between Contract, Part-Time and Full-Time Workers

An ADP Research Institute study shows that 72% of independent contractors state they chose contracting work over a traditional job. Being a contractor versus being an employee means not being locked into a rigid schedule. With control over the hours you work and the projects you accept, you can create a work schedule that fits into your life instead of the other way around. Full-time workers have a unique set of protections under the law, and therefore hiring a contract worker may be ideal depending on your company size and goals. For the employer, the upside of hiring a contract worker is easier accounting and the knowledge that the contractor is set for a specific time frame, and can be quickly and easily replaced if the fit is not ideal.

These workers may make more money than part-time employees in the short term; however, they also have to pay self-employment taxes on their earnings, which can add up over time. Hiring a contract worker rather than a full-time employee could save your business money; after all, you won’t have to pay for a contractor’s health insurance, 401 matches, vacation time or other benefits. However, choosing this option also comes with limitations and potential risks. Before you decide which type of worker to use for a given role, it is important to understand the differences between contractors and employees and the consequences for misclassifying workers. Please note that the information contained herein is limited in scope and is only intended as an overview of the differences in reporting forms for independent contractors and employees.

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For this reason, independent contractors tend to be the best choice if you need specific expertise for a project in a short period of time. One of the biggest benefits of contract work in the IT industry is the opportunity to earn higher wages than a regular full-time tech employee. Employers don’t have to pay benefits, unemployment insurance, holiday or vacation pay to contractors, so workers are guaranteed to receive a higher paycheck since these items aren’t being deducted out.

• Many companies seek this knowledge or skill set for specific projects or assignments, even if that means using these contractors for the short term.
• More and more small businesses are spending money on contractors.
• By avoiding hours in traffic, you’ll have more time to spend on favorite activities with your family and friends.
• Of course, you have a position to fill now and you certainly want to choose carefully to find a good fit.
• If found guilty of misclassification, employers will be responsible for all past payroll taxes, unemployment taxes, plus interest and penalties.

An employee, on the other hand, is on your team — you’re their supervisor, responsible for their behavior and also reporting their taxes. While independent contractors and freelancers both work on projects and for different organizations and not for a single employer, there are a few differences between these two types of employment. While most people are familiar with full-time and temporary employment, we are beginning to see an increasing number of contract positions. More employers are embracing the concept of contract jobs because it’s cheaper and less risky for them. Contract jobs allow employers to try workers for a specific period, rather than commit resources to train and pay new employees. A full-time employee is seen as a full part of a company’s workforce.

Independent Contractors

As short-term employees, it’s common for contractors to feel separated from the rest of the organization and it can be hard to get to know coworkers if you’re only planning to be with the company a short time. While regular employees build camaraderie and networks of support, contract workers can be left feeling alone and disconnected. If you decide to offer your contract workers health insurance, it could hurt your bargaining power with the health insurance company. You probably have a discounted bulk rate from the health insurance company because you have many employees with long-term health insurance plans. Contract employees are typically only there for a few months, which complicates things. Generally, you have more control over the work that an employee does than you do with a contractor. You must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to employees.

• Companies like Uber and FedEx have run into issues regarding contract employees.
• Full-time employees, in contrast, require lengthy onboarding processes to understand the intricacies of team dynamics, the company culture and overall goals.
• They also enjoy employee benefits such as paid vacation time or sick leave, retirement benefits, health insurance, life insurance, and more.
• If you work less than 30 hours a week, you’re considered a part-time employee.
• Our free tool allows you to compare insurance coverage and pricing to find a plan that suits your needs.
• An individual or business that pays an independent contractor $600 or more in a calendar year is responsible for sending the contractor a completed 1099-MISC by January 31 of the following calendar year.

This can be achieved by providing training or education stipends so both new and existing employees can grow and adapt, as well as fostering a positive work environment to keep them enthusiastic and motivated. Provides all supplies and equipment needed for the service provided. He has covered financial topics as an editor for more than a decade. Before joining NerdWallet he served as senior editorial manager of QuinStreet’s insurance sites and managing editor of Insure.com, and as an online media manager for the University of Nevada, Reno.

Onboarding and training

If you work less than 30 hours a week, you’re considered a part-time employee. Full-time employees are often loyal to their employers, help to grow the business in the long-term and support their employers in the community. Some years back, people with full-time jobs believed they had secure employment, but all parties understand that contract job will end at the completion of the contract. The reality today is that no job is secure,whether it’s a full-time or contract employment, so it doesn’t matter whether you choose a contract job or full-time employment . I’m Josh Doody, a professional salary negotiation coach who helps Senior Software Engineers and Engineering Managers negotiate job offers from big tech companies. On average, Software Engineers and Engineering Managers improve their first-year compensation by $47,273 with my help. The employer is responsible for a lot of the cost of employing someone.

A contractor is an independent worker who has autonomy and flexibility but does not receive benefits such as health insurance and paid time off. Learn the key differences between contractors and employees so you can hire the right type of workers for your business. It depends on what you are hiring the independent contractor to do. In some cases, independent contractors are paid more per hour because of their expertise (and that’s what you’re hiring them for). Here’s a breakdown of some of the pros and cons for both independent contractors and employees. Trying to figure out the difference between independent contractors and employees and when to use 1099s and W-2s can be confusing and overwhelming.

The IRS test for classifying employees

Will invoice you and expect to be paid according to the terms of the contract — usually at the end of satisfactory completion of the project. There isn’t a universal answer to what is better – being a contract worker or an employee. It all depends on an individual’s preferences and what they value more. Being a full-time employee has many benefits both for the employee and the employer. Freelancers can offer valuable industry insights which full-time employees might not be aware of, thus giving you a competitive edge. The ratio of contract vs. full time workers is on the increase in the US and worldwide.

• Whether you have only employees (W-2), only independent contractors , or a mix of the two, Square Payroll can make processing payroll easy.
• Regular employees create a sense of community and family in the workplace.
• Before choosing between a contract or full-time position, the vital point is to know all the details of the job.
• And join us as we compare contract and full-time employment to discover their unique advantages and disadvantages.
• While commission-based pay isn’t exclusive to 1099 employees, you may want to track commissions.
• On the other hand, independent contractors are typically given a job or project to work on without the company controlling when and how they do it, he said.

Some countries prohibit self-employees from working for only one client. Contractors should be allowed to have another source of income, a side project for a different company, etc. Even though the job market is diverse these days, it’s still contract vs full time possible to find great positions working for great companies. Developers and analysts are uniquely positioned in a field that is growing by leaps and bounds, and companies all over are eager to find smart, savvy workers they can hold on to.

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