Are You Hiring a Contractor or an Employee in Business and at Work?

In my HR travels, one of the most frequently asked questions is how to make the distinction between hiring a contractor (1099 for tax purposes ) and an employee (W-4 for tax purposes).

It is Sunday night, and reading IRS publications on the subject is a great sleep aid.  You can read how to determine whether you’re hiring a contractor or an employee at the link below. For the most conclusive and compliant determination, please consult an employment attorney:

Just as Wage & Hour enforcement entities frown upon making all of your employees exempt to avoid paying overtime, the IRS gets equally irritated when businesses hire 1099 contractors instead of employees to avoid paying employment taxes.  The link above gives an extremely thorough view into what actually constitutes an employee or a contractor, based on how the business treats the individual.  The IRS guidelines on Behavioral Control (illustrated by the link and verbiage below), are indicative of how businesses should strongly consider hiring employees rather than contractors to stay compliant – e.g., if they take instruction like an employee, they’re probably an employee:

Behavioral Control

Behavioral control refers to facts that show whether there is a right to direct or control how the worker does the work. A worker is an employee when the business has the right to direct and control the worker. The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.

The behavioral control factors fall into the categories of:

  • Type of instructions given
  • Degree of instruction
  • Evaluation systems
  • Training

Types of Instructions Given

An employee is generally subject to the business’s instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work.

  • When and where to do the work.
  • What tools or equipment to use.
  • What workers to hire or to assist with the work.
  • Where to purchase supplies and services.
  • What work must be performed by a specified individual.
  • What order or sequence to follow when performing the work.

Degree of Instruction

Degree of Instruction means that the more detailed the instructions, the more control the business exercises over the worker. More detailed instructions indicate that the worker is an employee.  Less detailed instructions reflect less control, indicating that the worker is more likely an independent contractor.

Note: The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker’s performance or instead has given up that right.

Evaluation System

If an evaluation system measures the details of how the work is performed, then these factors would point to an employee.

If the evaluation system measures just the end result, then this can point to either an independent contractor or an employee.


If the business provides the worker with training on how to do the job, this indicates that the business wants the job done in a particular way.  This is strong evidence that the worker is an employee. Periodic or on-going training about procedures and methods is even stronger evidence of an employer-employee relationship. However, independent contractors ordinarily use their own methods.

Hiring resources to help support your success?  More often than not, you’re hiring employees to ensure compliance, and consequently your success, in business and at work.


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