CMU School of Drama

Tuesday, September 27, 2016

Contractor or employee: What's the difference?

CBS News: Here’s a warning to small-business owners who routinely use contractors.

The owner of a home care services agency contracted with 35 workers to provide services to her customers. An IRS audit determined that the workers she paid were actually her employees, not independent contractors. The tax agency then demanded that she pay federal employment taxes, including the employer portion of Social Security taxes and federal unemployment tax.

If the IRS’s position holds, she would also be responsible for pay additional state unemployment taxes and workers’ compensation/disability premiums.

2 comments:

Marisa Rinchiuso said...

I have been asking myself the same question for years. Although, I completely agree with the court ruling in her favor, I do believe there should be more regulation on who is considered an employee versus a contractor. For small business, such as the one in the case examples, I can understand why contracting is needed. It is hard to pay all of that on top of the money you are already paying for their services. However, for large corporations, taking advantage of contractors can be a slippery slope. I have exclusively worked as a contract worker throughout my time prior to CMU, and sometimes it just seems incomparable. You work just as much and as hard as employees, yet you get none of the perks. I completely understand it for short term productions, but I worked at a theatre, off and on for two years, and I often wished I was considered an employee. One of the things that can become slippery when being a contract worker is no one, not even the government, is watching out for your wage. When you're an employee there is a minimum wage employers must abide by, but as a contractor you can be offered $1000 for a position on a show, then realize you're working 170 on this show and that suddenly comes down to less than $5.90/hour. You have to be your own advocate. I understand the good in contracting for businesses, but if you have continuous work from contractors, long-term, for large companies that can afford to pay them as employees, I think they should.

Daniel Silverman said...

To be completely honest, I didn’t read the entire article. We have spent a lot of time talking about this issue in Production Personnel Management. This topic applies to a lot of us in theater when working summer stock gigs or as designers. I didn’t realize the differences and benefits of employment versus contractual work. It is a topic that is important to a lot of us. I understand the reasons that summer stock employers hire people as independent contractors. According to the article, and the FLSA/NLRB, I really should have been an employee. It is an interesting lesson to learn and one that I wish I knew before taking summer stock jobs. This is something that I will keep with me for the future. Although I don’t see much summer stock in my future. I am surprised that my dad, being a retired lawyer, did not say anything about my being an employee versus independent contractor.

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