What are independent contractors and employees?

An independent contractor is self-employed. You enter into a contract with an independent contractor to do a specific role or complete a specific task. Contractors may set their own hours and use their own tools. They may even work for more than one business. Since they are self-employed, you do not withhold taxes from their paychecks; they pay their own taxes and provide their own benefits.

An employee is hired by your business under an employment agreement. You withhold taxes from their wages, train them, pay employment taxes for them, and may provide benefits. Because of this, you have more control over your employees — you dictate what they work on and when they work.