The Types of Employment: A Quick Reference Guide
We’re currently living in a complex labor market with many different types of employees and contractors. In recent years, we’ve seen a 22 percent increase in independent contractors as younger people seek alternative employment. We expect this trend to continue.
Understanding the types of employment will not only keep you out of legal trouble but you’ll be able to better understand the hiring process for both employees and contractors.
Types of Employees
First we’ll look at employees who receive a large portion of their wages from you and are listed as an employee of your business. This means that the tax code under the U.S Department of Labor classifies them as an “employee,” not a contractor. You typically pay these employees an hourly rate or salary and provide them with a pay stub.
These employees work around 35-40 hours per week each week to meet IRS standards for classification as a full-time employee. The general consensus is that full-time employees are provided with health care coverage, benefits, and retirement access. If an employee works more than 50 hours they’re considered an Applicable Large Employer which requires them to provide benefits.
If the employee works less than 30 hours per week on a consistent basis, they are considered part-time. They won’t qualify for benefits but employers are required to pay the same taxes and disability insurance whether the employee is full or part-time. This is the appeal of hiring freelancers and independent contractors because they operate as their own independent business so the employer doesn’t have to provide them with benefits.
Whether they go through an agency or you hire them directly, a temporary employee is someone hired for a specific project or length of time. Temps still receive unemployment and social security benefits and the employer can retain these employees once the initial project is complete if they reach an agreement.
Seasonal workers are popular in businesses related to agriculture or weather specific jobs such as landscaping or snow removal. Employers are also responsible for paying unemployment and social security for these employees.
Other Types of Workers
The following types of employment are called “contingent” meaning services are provided by an independent business (contractor) in exchange for payment. This can be a written or verbal agreement.
Independent Contractors/ Freelancers
These two terms are used interchangeably but most people would think of an independent contractor being a “tradesperson” and a freelancer being more a “creative.” Either way, anyone who provides self-employed services independent of a managing business would be considered a freelancer or independent contractor.
A consultant is another example of someone who can work for your business without actually being employed by you. These professionals can spend months and even years working with you providing their expert advice without actually doing the work themselves.
Independent Contractor vs Employee
Besides all the legal and tax implications of these two, what actually is the difference? An employer essentially has control over an employee. They decide when they come to work, how they do their job, when they’re paid, and what type of benefits they receive.
An independent contractor is free to work when they want, how they want, where they want, and they’re in control of how their job is performed because they’re usually providing services that their client may be unfamiliar with. That’s why they’ve hired a professional. When a client starts to take control over a freelancer, that is when they become an employee and must be treated as such.
Whether you’re planning to hire full-time, part-time, or self-employed, having proper and accurate pay stubs is important. PayStubs 365 makes it easy to quickly populate pay stubs so you don’t have to spend a ton of time on it or risk making mistakes. Use our Paystub Generator today!