Employee or Independent
is an Employee?
general rule is that anyone who performs services for you is your
employee if you can control what will be done and how it will be done.
Employees are truly under your control and direct supervision.
You set the work hours, provide training, and have the right to hire and
fire. The disadvantages are the expenses associated with employment
taxes and workers compensation insurance. But be careful, trying to save
a few dollars today by classifying your guides as independent
contractors can cost you big down the road.
It is critical that you, the employer,
correctly determine whether the individuals providing services are
employees or independent contractors. Generally, you must withhold
income taxes, withhold and pay Social Security and Medicare taxes, and
pay unemployment tax on wages paid to an employee. You do not generally
have to withhold or pay any taxes on payments to independent
contractors. Caution: If you incorrectly classify an employee as
an independent contractor, you can be held liable for employment taxes
for that worker, plus a penalty.
is an Independent Contractor (IC)?
general rule is that you, the payer, have the right to control or
direct only the result of the work done by an independent
contractor, and not the means and methods of accomplishing the result.
Control is the most important test. The IRS and courts will
examine the degree to which the facility controls the workers processes
and work schedules.
A few things to think about:
Just because you label a worker an “IC” does NOT mean
they are one.
The “IC” performs more than one important obligation.
If you have labeled someone an “IC”, make sure the
understanding is mutual.
Use a written contract.
A willful violation can be costly in terms of IRS penalties
All circumstances are unique; consult your CPA or your
does this affect your liabilities and general liability insurance?
policy is written with your business as the named insured, therefore,
the policy is intended to defend your business, its owners, and your
employees if any are named in a suit.
Some general liability insurance policies will not defend against or pay
claims on behalf of your independent contractors. Meaning, that if you
are classifying your guides as independent contractors and they are
deemed to be the cause of an accident and litigation ensues naming them
individually in a suit, your policy may not defend them. This goes along with the idea the
independent contractors are
truly independent and carry their own insurance. They are left to defend
themselves including legal costs for a defense, and if they are found
liable, the damages could be life changing. Another point to mention is
that if an independent contractor is injured while working on your behalf,
he/she can bring
suit against you for medical and lost wages, unlike employees that must
use workers compensation insurance to remedy their loss.
are various ways to ensure you and your personnel are insured
correctly. Please contact us to review your situation in more
– Gusic Insurance Group, Inc.
4067 Greensburg Pike
Pittsburgh PA 15221
Phone: (412) 271-8888
Fax: (412) 271-8898