The terms “subcontractor” and “employee” are often interchanged because both are professional workers performing a job for an employer and getting monetary compensation for that work. However, subcontractors and employees are two completely different types of workers. An employee is hired to continuously work for an employer, while a subcontractor is hired for a short period of time to complete a single project.
Employees are professionally trained individuals who are hired by an employer to work a specific position in the business. Employees are hired under an employment contract for either part-time or full-time positions. Some employees will get rights and duties outlined in their employment contract, such as responsibilities in the position and given salary for the job performed. Employees are often hired for permanent positions.
A subcontractor is also a trained professional who performs work under a given contract with an employer. However, a subcontractor is hired for only a specific project for a temporary period of time. The subcontractor is hired to perform a specific job that the company does not have resources, expertise or funding to complete using the existing staff. While an employee may work only for a single company, a subcontractor can have several active contracts with companies at any given time.
Employees can get certain benefits by signing an employee contract with an employer, such as health coverage, paid vacation time and additional benefit coverage. A subcontractor is often responsible for personal insurance and personal health coverage, including being covered for periods of unemployment. Also, an employee will get tax information from the employer, where a subcontractor is responsible for filing personal contractor taxes on an annual or quarterly basis.
Hiring a subcontractor can be the best option, especially if the funds are not available to pay a full-time employee to do the same work. Create a written contract to protect the interests of the business that explains what the subcontractor is responsible for and how much she will get paid for the temporary work. Ask for a W-9 form, including Social Security number and Employer Identification Number, for federal tax purposes. Invoice all work and make payments using the company’s name, so the amounts are part of the expenses for tax time.