The purpose of this report is to help the reader understand the difference between independent contractors and employees. Employers use independent contractors for many reasons, including cost, seasonal fluctuations, temporary assignments or highly skilled services. Independent contractors are different from employees in that they usually are not eligible for benefits such as health insurance or paid time off, are not covered by workers' compensation insurance and are responsible for submitting their own income taxes to the Internal Revenue Service. However, someone does not become an independent contractor just because he or she is labelled that way, is not offered certain benefits or because her or his income taxes are not withheld. In fact, not even the signing of a contract or agreement ensures that the independent contractor will not be classified as an employee by a government agency or the courts. The ultimate test to determine whether someone is an employee or an independent contractor is the degree of control an employer exercises over that individual's work.
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