Business owners in Louisiana who are just starting out may be able to run the business alone for a little while, but as it grows it is time to begin hiring help. When hiring, owners can choose between having employees and independent contractors.
There are benefits and disadvantages of each, and it is important that a company understands the difference between the two of them. If there is a misclassification, there are legal and financial consequences.
According to FindLaw, an employer generally has more control over an employee. An employer can tell him or her where to work, what the specific job tasks are and what hours to work. As a result, the employer provides training and pays for supplies and other costs associated with the job. An employee receives a salary after the employer takes taxes out.
One benefit for employees is that they receive protection under state and federal laws regarding wage and hour rules, discrimination, unemployment and workplace safety. They also receive benefits such as sick days, vacation pay and health insurance.
Independent contractors have more control over their work, and they can work for multiple companies at the same time. Contractors make their own hours, dictate how to do the job and typically can work where they want. On the flip side, they are in charge of all costs associated with performing the job and they do not have the same federal and state protections employees do. A business owner does not take any taxes out of the pay, but the contractor must pay taxes on their own.
The Chron compares costs associated between the two hiring classifications. In general, business owners can save around 30% by hiring a contractor because they are not responsible for taxes, insurance and benefits. However, if an employer misclassifies either a contractor or an employee, the financial consequences are expensive, so they should ensure they get it right.