Free Spirits

The Fine Print

What exactly is the difference

between an employee and a freelancer (also called an independent contractor)?

"The principal distinction is control over the means to the end--how you get to the completed project," says Jeffrey L. Braff, a partner in the labor and employment law department of Philadelphia law firm Cozen and O'Connor. "[But] you need to look at the totality of the circumstances." In other words, a variety of factors come into play.

Here are some things Braff suggests watching for:

  • Don't provide employee benefits or withhold taxes for independent contractors.
  • Pay independent contractors on a per-project basis, rather than hourly, and have your contractor bill you with an invoice.
  • It's helpful if independent contractors have an entrepreneurial stake in their business-for example, they (rather than you) pay for their expenses. Keep copies of paperwork with their company logo to show the contractor is an independent business.
  • Have a contract documenting their independent contractor status; be careful about termination and exclusivity provisions that may be more suitable to an employee contract.
  • Watch your language: Say "retained" and discontinued" instead of "hired" and "fired." You are the "principal" instead of "employer." Contractors are paid "fees," not "salaries" or "wages."
  • If you run a newspaper ad for a contractor, place it in the "Business Opportunities" section and keep a copy for your records.

For more information, visit and download Publication 15-A, Employer's Supplemental Tax Guide.

« Previous 1 Page 2
Loading the player ...

Shark Tank's Daymond John on Lessons From His Worst Mistakes

Ads by Google

Share Your Thoughts

Most Shared Stories

The Two Words Steve Jobs Hated Most
15 Signs You're an Entrepreneur
The 4 Essentials to Starting a Company Whether You Have Money or Not
Want Media Attention? Target Trades First
10 Things That Set Entrepreneurs Apart From the 9-to-5 Crowd