An independent contractor is distinct from an employee who regularly works for a single employer. Independent contractors are not employees of the business or entity they are providing services for. There are many financial benefits to engaging independent contractors, including not having to provide traditional benefits such as health insurance, stock options, or retirement plans, to name a few.

By definition, independent contractors can dictate their schedules. Independent contractors are their business entity; a client cannot determine their work hours. Just because they may have a contract with you doesn’t mean they aren’t allowed to take on additional work for other clients as well. Misclassification of an independent contractor can get employers in big trouble with the DO and IRS. The IRS has strict definitions to determine whether a worker is an employee or an independent contractor. By misclassifying a worker, you could be subject to some hefty penalties and fines.

On January 6, 2021, the Department of Labor announced a final rule clarifying the standard for employee versus independent contractors under the Fair Labor Standards Act (FLSA). The effective date of the final rule was March 8, 2021. Here is a link to the article, and I encourage you to read it. Fair Labor Standards Act.

I highly recommend that when hiring a Virtual Assistant, you are very clear on whether you will be hiring them as an employee or as an independent contractor. I supply all my clients with a work contract and NDA that clearly outlines that I am an independent contractor and what the work is that I will be performing for them. I like going into a business relationship with new clients with clear guidelines of what I am offering and what my expectations are for myself and them. I leave no gray areas. I also supply them with my W9, which has my EIN for tax purposes. This shows that I am a true professional and that I am registered with the Secretary of State.

If you are thinking of hiring a freelancer for your business, please be sure to check the IRS guidelines and speak to your accountant or tax person. They can discuss the benefits for your business of hiring an independent contractor versus an employee.

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