How to differentiate a contractor from an employee?

ice There may several instances when you are faced with a dilemma of deciding whether the individual you are dealing with falls under the category of individual contractor or staff member.

One quick way to arrive at a conclusion is to analyze whether you are paying employment taxes. In case you do the individual concerned would come under the purview of employee.

It may not be very difficult for you to decide if you follow the given set of guidelines:

Step 1 – You can also decide on following lines:

•    Extent of control you exercise over the worker’s task.

•    Kind of formal training provided to this person

•    Level of instruction given to the worker to complete the task


•    Authority to exercise control to modify individual’s behavior
If the answers to the above question are all in the affirmative, then you are surely dealing with an employee.

Step 2 – Scrutinize the additional benefits, if any given to the worker such as sick pay, pension, provident fund, gratuity, health insurance or any other payment to meet with the provisions of employment statute.

Step 3 – Determine if the tasks undertaken by the individual is fundamental to the growth of your business. Generally, if a person holds an important designation within your organizational set up which is somewhat of a permanent nature like HR manager, is certainly your employee.

Step 4 – Analyze if the worker exclusively renders his or her services in your firm with no other commitments in other organizations. If he/she does then the concerned person is the member of the respective firm. This excludes people hired on temporary commission basis as they can work for several firms at a time.

Step 5 – Ascertain if you are supplying the worker with the necessary provisions and reimbursing for his expenses to get a job done. In case you do then it is rest assured that he or she is the staff member of your firm.



Bhrat Brij

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