Independent Contractor (IC)

A self-employed individual performing services for a company under contract rather than as an employee, either on- or off-site. (Also referred to as freelancers, consultants, and, in the United States, “1099s,” which is the designation of the IRS form that companies use to report the money paid to independent contractors.) Unlike employees, independent contractors are free to perform their work as they see fit. In the United States, the IRS formerly used a twenty factor test to determine IC status, but now has a simplified three-factor test consisting of examinations of behavioral control (whether the client directs or controls the manner in which work is performed), financial control (of the timing and method of payment), and relationship of the parties (is the worker free to pursue other clients or in a binding relationship with the company). (See also: IRS Three Factor Test.) Similar methodology is used by tax authorities in European staffing markets to determine correct employment status. In the United Kingdom, IR35 legislation aims to eliminate the avoidance of tax and social insurance obligations through the use of intermediaries.

Source: Staffing Industry Analysts

  • Share/Bookmark