Essay Example: Employee vs. Independent Contractor

The determination of whether a worker is an independent contractor or employee is based on the law rules, which take into consideration the relationship between the worker and the business. For instance, an employer has the right to regulate how the worker executes services, while the independent contractors are their managers.

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A court considers three aspects when determining the worker's status namely the financial control, parties' relationship, and behavioral control. The behavioral control entails training and instructions, where an employer provides directives with specific guidelines on how, where, and when to work. An independent contractor employs their techniques, while the employees are trained to perform services in a detailed manner. Based on financial control, one can determine the distinction between the independent contractors vs. employee by the extent to which the staff has the unreimbursed business expense. For instance, Independent contractors have unreimbursed expenses because they incur fixed ongoing costs regardless of whether work is currently being done, and the employees can earn the reimbursement expenses in connection with the services that they perform where they work (Paychex, 2014). Moreover, because an independent contractor uses someone else equipment in accomplishing work, he or she has a significant investment in the business; therefore, he or she can procure a profit or a loss during the trade. The kind of relationship between the parties determines the work status, for example, written contracts, which indicate how the parties work together, and whether the corporation provides the employees with benefits such as sick pay, vacation pay, insurance, and a pension plan.

Besides, Joan should be treated as an employee because she performs jobs only assigned by Bernie and Madrid, and she is paid on a weekly basis. The employer determines Joan's remunerations, and the clients make payments to Madrid and Bernie Corporation. Further, Joan has acquired training from her employer, and if the work executed has faults, Madrid and Bernie return the work to Joan for corrections. Joan Newman business can incur reimbursed expenses from Madrid and Berne Company, and cannot experience profit or loss because Joan is paid on commission.

Of equal importance, there are several features, which determine the employee status; these aspects are engaged to evaluate the validity of the independent contractor and right to control (Oregon, 2016). One of the factors includes the degree of business integration where most of the employees are incorporated into the business for the company to succeed. Secondly, is the control assistance, if the worker retains control over paying helpers, firing, and supervision, he is an independent contractor. An employment relationship occurs when the company hires, supervises, and recompenses a worker's assistant. Thirdly, a probable employment relationship is established if there is a continuous relationship between the worker and the organization, while an independent contractor arrangement involves sequential, and multiple projects that require a continuing relationship. Fourthly, the method of payment determines if one is an employee or an independent contractor, to illustrate, an employment relationship is characterized by weekly, hourly, and monthly payment schedules, while an independent contractor relationship is described when one is compensated on the project completion or payment on commission. Fifthly, without liability employees unilaterally can terminate their work for a company, whereas the independent contractor, except when permitted by the contracts, cannot dismiss their services without liability. Finally, independent contractors provide services for several unrelated entities while employees provide services for a particular organization.

To conclude, according to the factors that determine the employees' classification, Joan is no doubt an employee because she is paid on a weekly basis by Madrid and Berne. Moreover, there is an ongoing relationship between Joan Newman business and the company because Joan was hired to perform contract bookkeeping services for Madrid and Berne customers, who require such expertise.

References

Paychex. (2014). Employee vs. Independent contractor. Retrieved from https://www.paychex.com/a/d/accounting1099-employee-vs-idependent-contracto.pdf

Oregon. (2016). IRS 20 Factors test-independent contractor or employee?. Retrieved from www.oregon.gov/ada/shared/.../20FactorTestforIndependentContractors.pdf.