So far that new job sounds pretty good. The boss tells you no taxes are taken out. You're paid by the job instead of the hour. You're really your own boss, he says. What's not to love?
Until he gives you a work schedule. Or sticks you with a dress code. Or hands you that phone-book-sized employee manual and tells you to memorize it.
That dream job just fell apart. You're really not working for yourself after all. The boss just says you are for his own purposes.
Minimum wage does not exist for minimum contractors. Neither do benefits. If you get hurt on the job, you're out of luck. No workmen's comp for you. If you get laid off, you're on your own.
The American Institute of CPAs says independent contractors are 30 percent cheaper than regular employees even if their paychecks say the same thing.
There are some really good reasons to work as an independent contractor. But doing it just because your boss says you are is not one of them.
According to the Government Accountability Office report, about 10 million workers in the United States were classified as independents. More recent numbers show an increase in this classification, but the department of Labor says about a third of all companies say some of their workers are independents when they're not. These numbers are likely to increase with new health insurance regulations.
Taxi drivers, hairdressers and entertainment workers often get classified as independents, but the description cuts across several job titles. Anyone who is paid in cash without any paperwork is also likely to be called an independent.
It's easy for employers -- and employees -- to make the misclassification error because many don't know the difference.
In Nelson v. Yellow Cab the South Carolina Supreme Court outlined some stringent rules to distinguish the employees from the contractors. While it was a state court, these regulations remain the same across the United States.
If you can't do the same work for someone else at the same time, you're probably an employee. This isn't always so; your contract may have a non-compete clause. Check it to make sure.
- If you can be fired, you're probably an employee.
- If you're told where and how you must work, you're an employee.
- If you have a dress code, you're probably an employee.
- If you're given a work schedule, you're definitely an employee.
- If you can't turn down a task or even farm it out to someone else, you're an employee.
If you're really an employee and your employer calls you an independent contractor - even if you signed a contract - that company is breaking the law. The Internal Revenue Service and Department of Labor take this seriously
If you're an independent contractor you're not married to a company. It's your client, and you can have as many clients as you can handle.
Being an independent contractor can be a good or bad thing. You can do your work in your own manner and style, you don't have to deal with a million rules and every day is casual day. You set your own pay rate.
The biggest advantage is that you are your own boss.
But also, the biggest disadvantage is that you are your own boss.
There's no guarantee you'll actually make a living as an independent contractor. You might not even make minimum wage, and you probably won't be able to knock off at 5 p.m. like everyone else. When you're self-employed you might work harder than you ever did in your life because your boss is such a slave driver.
But you're still your own boss, provided you really are.
Photo: (Photo from sxc.hu)