When I started my first internship, I was excited to learn and absorb anything and everything I could to make the most out of this experience. Unfortunately, my experience started with a great deal of stress because only three days before I had to start I learned that I was being hired as an Independent Contractor.
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For those who may not be familiar with this type of employment, an independent contractor is not, legally, an employee. These are some of the ways they compare:
— Employees
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More directions/supervision from employer
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Typically only one job
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Schedule: Set hours
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Payment: salary/hourly
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Duration: Ongoing assignments/employment duration
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Employer provides all equipment and tools
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Place: Set place of work, office etc.
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Contract: stating one is an employee
— Independent Contractors
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Less directions/loose supervision
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Individuals may hold many jobs
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Schedule: set their own/pick own hours
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Payment: from the job itself/stipend (no taxes withheld)
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Duration: tend to be for a fixed period of time (short intervals)
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Provide their own equipment and materials
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Place: Work locations vary, can work from home, etc.
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Contract: loose/flexible; stating one is an independent contractor
Although an independent contractor is contractually hired by an employer to do a certain job, the employer does not tell you how, when or for what duration said job must be done. The employer also does not give you the resources to do said job, and does not pay you like a normal employee, hence, they do not withhold taxes from your pay or provide you with any employee benefits or job security. You may take Uber drivers as an example.
Uber drivers…
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Provide their own car
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Pay for gas and maintenance for that car
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Pick their own hours
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Pay their own taxes
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Get paid directly from the job (picking up rides)
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Can stop and start working at Uber as they will
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Work locations vary and there is no dedicated office
…hence, they are independent contractors.
As a student who had never held a position like this before, I happily signed my “official co-op” contract and passed it back to my employer. It wasn’t until after signing that I talked to my father who warned me about the risks I was taking on. Independent contractor contracts can be intimidating. They included clauses that release the employer of liability of essentially everything that could go wrong during your employment. They can also decide to just not pay you. The contract may state that if your work is not deemed up to par with the standards of the employer they do not have to pay you. These positions also allow employers to hire workers without having to pay a percentage for their taxes, thus saving the company money. This then places the burden of taxes entirely on the shoulders of the independent contractor. Having no prior idea of what this meant, I was very nervous upon walking into my first day.
Despite these initial concerns, I was pleasantly surprised to walk into the office on my first day and be given a laptop, computer monitor, desk, and chair, and more – all the resources I needed to be successful in my position. I was given access to all of the necessary software programs I needed and all of the tangible tools that would help me do the work I was given. Contrary to the contract I signed, I received equipment and materials that employees tend to receive, not independent contractors. I quickly learned that the only aspect of my job that did match the description of an independent contractor was the way I was paid. Now, a senior at Drexel, well into my legal studies curriculum, I understand that by law, I was not treated as an independent contractor, and thus I should not have been paid like one.
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Although it was nice to receive a large lump sum in my bank account every few weeks (because of course, the payment schedule was far from routine), I did have to plan in advance and set aside nearly 21% of each paycheck so that I could make sure the money will be there next tax season. This part was very frustrating for me because aside from simply being inconvenient, I also had to pay nearly twice as much in taxes than I would have if I was paid like a normal employee.
If you are ever handed an independent contractor contract, when you aren’t expecting to be paid that way, definitely have a lawyer take a look at it before signing it. It’s important to know exactly what you are signing up for when you start a new job. For me, I didn’t experience any real negative repercussions from being an independent contractor, but that is not the case for everyone – just be sure you know the risks you are taking on before signing! Image courtesy of Wikipedia