Contract Workers vs. Employees: What Your Business Needs to Know

There are many differences between a contractor and an employee, but in simple terms, the main difference is one can be controlled by the employer and one cannot.

"Most people think the only difference between an independent contractor and an employee is how they are paid. Specifically, independent contractors' pay is not subject to withholdings, such as federal income taxes and FICA taxes," said attorney Michael C. Harman. "In addition to compensation, independent contractors have more autonomy in the work they perform."

Harman noted that employees are hired to perform specific work at the direction of the employer. Independent contractors, on the other hand, are typically given a job or project to work on without being completely controlled on when and how to do it by the company, he said.

The onboarding and training process also differs greatly. Since contractors are expected to focus on a specific project, they are often given only the information critical to completing that task, according to Kimberly Schneiderman, senior practice development manager at RiseSmart. Full-time employees, she said, require lengthy onboarding processes to understand the intricacies of team dynamics, company culture and overall goals.

"Hiring goals around each type of employee is also different," Schneiderman added. "While companies work to make sure full-time employees are engaged and work to gain loyalty, these same organizations need to realize that their contractors are always looking for the next gig and are not invested in long-term outcomes, as full-time employees are expected to be."