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Work-At-Home Employee Vs Contract Worker

© Leslie Truex

The distinction between an employee or contract worker is an important one. Not only does it affect the relationship between the company and worker, but it can have tax implications as well. An employee is a worker who is hired full or part-time, is paid a salary or hourly wage, and whose employer deducts tax and social security. A contract worker differs in that an organaziation makes a contract with the worker to complete specific tasks or projects. While contract workers can be 'hired' for full or part-time work, they are paid when certain tasks or projects are completed. Further, the contracting organization pays the worker a straight fee or commission without tax or social security deductions. A good example of a contract worker is a salesperson. Generally sales people are paid a commission based on sales volume. Because the sales organization doesn't pay taxes, the salesman is responsible for paying usually in quartly installments.

Of course there are always exceptions. A company called Getting Know You hires sales people on contract however, it does deduct taxes from commission payments. It is important to know before accepting a job how you are going to be categorized by the company and whether or not it will be issuing a W-2 (employee earnings) or 1099 (contract work payments) for tax purposes.

Which is better? Both certainly have their advantages and disadvantages. Employee status offers the security of a stable job and regular paycheck. On the other hand, days and hours of work are generally not as flexible. Further employees may still be required to work on site a set number of days per week or month. And frequently, employees need to live within a certain mile or time radious of the company site.

Contract work offers the flexibility of setting one's own schedule. Because work is project-based, contract workers can work at a tempo that earns them the income they desire. Not only is time a flexible issue but often so is the income that can be generated. If a worker wants to earn a specific amount of money and can meet the requirements needed to earn it, he can; he isn't limited by a salary or wage. On the other hand, he only earns when he produces. "I worked three days per week with a goal of selling three ads," said a sales woman working from home. "If I wanted more money, I worked more days or more hours per day. In essence, I could decide how much I wanted to make that week and then work the hours that required me to earn it. Some weeks I exceeded my goal but there were times that I didn't even come close. That is always hard to deal with."