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The business world goes through changes all the time. Currently, many companies are hiring independent contractors instead of hiring people long-term. These contract employees come to work on projects for short periods of time. Keep reading to learn everything that you need to know about contract employees. 

Understanding Contract Employees

Contract employees are going to sign short-term contracts to work on projects for businesses. They’re similar to freelance workers, but there is an important difference. Contract employees will generally be working for one employer at a time. Freelancers are free to take on multiple jobs from different employers. 

Tax Information

You should know that contract employees are responsible for their own taxes. This means that you don’t have to pay things such as social security tax, unemployment tax, or employment tax for these workers. The contract employees are completely responsible for paying these taxes themselves. It’s much different than hiring a normal worker. 

The Cost Is Lower for Contract Employees

The overall cost is much lower for contract employees. You might be able to pay these workers lower wages than you would if you hired full-time employees. It’s also not necessary to worry about paying them benefits or offering other perks such as company equipment access. The downside is that contract employees set their own availability, and this means that they might not always be available to handle urgent matters if something important pops up. 

Be Careful Not to Misclassify Workers

You should be careful not to misclassify workers. Doing so could get you in trouble with tax authorities. If you’re supposed to classify workers as salaried employees, then you might have to pay back taxes if you get caught classifying them as freelancers on contractors. It’s always important to ensure that you get these classifications right for the sake of your company. 

To get things right, it’s going to be best to look up the specific IRS rules for worker classifications. This should keep you from making errors that will cause problems. Factors such as how you pay your workers and whether the workers are free to work for other companies will play a role in how they’re supposed to be classified.