Labor Law or the Employment Law represents a legal relationship between the employees and their employers. Labor Law related statutes appear at all government levels. The regulation governing the employer/employee relationship starts immediately an employer makes an employment offer to an employee.

This law regulates the whole employee/employer relationship-from the hiring process down to the contract termination. It also encloses litigation concerning discrimination and unfair labor proceedings.

What is the main difference between an employee and an independent contractor?

Aside from the question of whether the regulations governing the relationship between an employee and employer apply, understanding this disparity is also essential with regards to the handling of income either earned by an independent contractor or employee.

An employee salary is bound by personal income tax deductions (both state and federal). Employers deduct half of the Medicare and Social Security tax from the wages of an employee while they contribute the remainder half. Employers contribute to several employment systems in the state (like education or disability) aside from also offering employee compensation in the instance an accident befalls an employee while on duty.

This loading’ either for benefits and taxes can represent an additional cost of between 20 and 35 % to employers above the gross wages of an employee.

On the contrary, Independent contractors operate for their benefit. The Independent contractors part with quarterly deposits for state and federal personal income tax (centered on annual estimates), provides individual benefits and insurance not to mention paying the full contribution to Medicare and Social Security taxes. Independent contractors operate free of any hour and wage regulations. What’s more, they also don’t benefit from unemployment insurance programs whatsoever.

There exists no employee-employer relationship between a client and an independent contractor. Independent contractors control all the processes including job operation, while the service/product purchaser retains control of the work result.

When are SLAs or agreements with contractors, service providers and employees?

When it comes to general employees, you need to have policies in place rather than employment agreements. Employee agreements should only be with critical employees to a company together with those having unique benefits. The Labor Law is consecutively precise, and as such you should consult with a professional attorney before making any decision.

Company policies simply set out uniform instructions and treatment for staff on workplace behavior and performance or give notice. These policies should be part of the initial document the employee receives during the hiring process to guarantee that it is binding as is effective on them.

Employment contracts primarily ensure that all parties are bound legally to the whole employer-employee relationship. With these agreements, employers are liable for giving an employee the remainder of their salary in case the employer breaches the contract and dismisses the employee. What’s more, employees cannot quit without the employer suing them for violating the contract. Also included in these agreements is salary, vacation, bonus, among other sections. The sections are typically not only comprehensive but also restrictive to either party.

As for service providers or contractors, an agreement is crucial. Devoid of an officially written agreement structures under standard copyright regulations, you relinquish your ownership of the products of your staff. Moreover, it is also to guarantee that there is an explicit agreement about the services, warranty of the products and the certainty of originality of the job from the contractor.

SLAs (service level agreement) are agreements for services that outline the performance levels which must be met.

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Independent contractors agree with a business or firm through a written contract that details the duties, pay, responsibilities, etc. of each. This independent contractor agreement is then executed independently of the business or organization by the independent contractor. In this way, independent contractors differ from employees because they are not entitled to typical employee benefits such as health insurance, retirement benefits, social security, etc. They work at their own pace and on their terms as long as they fulfill the conditions of the contract.

Who are IC’s?

An IC can be any individual or any business that performs services for another person or company under an agreement but is not subject to that person or business in the manner, means, or right to control their performance of those services. The company that hires an independent contractor is not themselves liable to others for any acts or omissions carried out by the independent contractor.

Your employment contracts may make provision for overtime to be worked by employees when the business requires it. Even so, some employees are quick to find excuses as to why they cannot do overtime just then. An independent contractor, on the other hand, sees any assignment as a business opportunity, regardless of whether it demands working over a weekend, public holiday or after regular business hours.

What is the Workload Like? 

Unfortunately for independent contractors, it is often either feast or famine, so if there’s work on offer they tend to grab it, regardless of whether they already have a heavy workload. The situation might then arise that they can’t meet your deadline, but you will quickly learn whom you can always rely on.

What if the IC Disappears?

If an employee were to abscond, you have to follow the proper statutory procedure e.g. wait the appropriate period to establish their non-return, send the required notices, hold a disciplinary hearing (even in absentia) and then dismiss. It takes time and costs the business money. With an IC, your agreement will stipulate “no work, no pay”; and you can employ a replacement immediately.

Independent contractors are appointed based on a portfolio of work, reputation or referral, which should be proven evidence of competence. If for whatever reason, you find yourself with someone who does not deliver, it is relatively easy to terminate the agreement. It is crucial to have a comprehensive agreement in place to establish their status, determine the payment schedule, confidentiality provisions and ownership of work.

There may be legal or practical reasons why a business cannot classify a significant portion of their employees as independent contractors. However, if contractors are used in conjunction with permanent staff, their work may challenge employees and motivate them to better performances.

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