Not all workers in the United States are classified as “employees.” According to a recent article published by Forbes, approximately 35% of the entire U.S. workforce are independent contractors. Furthermore, analysts believe this number will grow to 40% by 2025. So, what is an independent contractor exactly, and how do they differ from employees? To learn more about independent contractors, keep reading.
Independent Contractors: The Basics
An independent contractor is a person, business or corporation that provides services and/or goods under a contract or other agreement. The key difference between an independent contractor and an employee, however, is that the former does not perform regular, ongoing work. Instead, independent contractors work on their own schedule.
The pay for independent contractors also differs from employees. Independent contractors are typically paid on a freelance basis, such as a flat amount of per job completed, whereas employees are usually paid by the hour or given an annual salary. There are other nuances separating the two, however, such as employee protection laws — something that’s not offered independent contractors.
Advantages of Being an Independent Contractor
There are several advantages to being an independent contractor, one of which is the ability to set your own hours (at least to some degree). While employees typically work on a fixed schedule, independent contractors have greater freedom over the hours which they work. Independent contractors are also able to develop a network of clients and customers, which can prove highly useful for long-term success.
Disadvantages of Being an Independent Contractor
On the other hand, however, there are also disadvantages to being an independent contractor. For starters, there’s no minimum wage required for independent contractors. Being that many independent contractors are paid per sale or by performance, you could end up making less than the minimum wage for your respective state. Secondly, independent contractors are responsible for paying their own taxes, which usually involves making quarterly estimated payments to the IRS based on how much you expect to earn for the year.
An independent contractor comes with its own pros and cons. However, there’s no denying the fact that independent contractors are becoming more and more popular in the United States. Whether it’s Uber, Lyft, AirBNB, etc., countless companies are now expanding their workforce by hiring independent contractors.
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