The IRS views an independent contractor as a person who works apart from the firm, and the rules governing them are not extremely clear cut. This wide room for interpretation has led to disputes in a number of workplaces. Fortunately, the status of an independent contractor is not as ambiguous as that of intern architect or draftsman.
By definition, an independent contractor is a person who has a significant amount of control over his or her work, achieves goals independently from the firm, doesn’t need to adhere to all the firm’s rules, uses his or her own equipment and doesn’t require close supervision by a member of the firm.
Characteristics of an employee
An employee must follow the set rules of the firm. He or she receives payment through a W-2 rather than a 1099 form. An employee uses the firm’s equipment to complete jobs, has a title with the firm and is subject to supervision by a member of the firm.
The transformation from contractors into employees
4 Key Points
- A person’s status changes when the firm takes them under its wing. Typically, this process involves the following aspects: training, giving the person authority to make decisions for the business, assigning the person key duties to perform and redefining the person’s work status as permanent, off-probation or retained for a set period of time. The process is complete when the new employee understands their work responsibilities and begins a project on behalf of the firm.
- It is critical that the person understand what it means when he or she has become an agent of the firm. The best way to accomplish this task is in writing. The new architect or interior designer and the owner of the firm should sign a letter of agreement stating the worker is now an employee.
- You can ratify and celebrate the change in a person’s status by providing them with business cards that state their title and contact information. Having a letter signed and dated by the owner that contains a start date is also helpful and thoughtful for those changing from independent contractors into employees.
- Finally, it is meaningful for the firm to circulate an internal announcement that they have hired the independent contractor as a full-time employee.