Definition of a Contract Worker
A contract worker is not an employee of a company. He is a self-employed
person who operates his own business, usually as a sole proprietor. He is hired
for a specific task or project, sets his own rates and pays his own income taxes.
A contract worker must find his own clients and complete a specific task for them.
He is not bound by the control of the company.
1. The Internal Revenue Service has strict requirements for a contract
worker. In general, if a company has strict control over the person's work
schedule, work location and closely examines the work process, the worker
might be considered an employee, not a contract worker, regardless of how she
2. By hiring a contract worker, a corporation will be able to save money
because the worker, not the corporation, is responsible for his own payroll taxes,
training, transportation, health insurance, and other benefits and costs. A
company does not pay a contractor for holidays, sick time or other employee
3. A contractor controls her own hours and chooses her own clients. A
contractor is not necessarily committed to only one company at any given time.
As her schedule allows, she may concurrently work for as many companies as
she chooses. A contractor has the right to refuse additional work from any
company if she so chooses.
4. A contractor is generally hired for one project or task. A client company
may provide specifics on the project, but may not provide detailed steps on how
to accomplish the task, nor require the contractor to work set hours. However,
the worker and designated people from a company may need to meet regularly
to provide updates or gather more information for proper completion of the
5. A contractor is usually paid on a per-job basis and generally cannot be
fired as long as he is meeting the contractual requirements as set down at the
beginning of the project. A contractor should have a signed contract before
beginning a project. He then provides an invoice to the company to be paid on an
agreed-upon schedule. A contractor may hire another person to complete all or
part of the project, solely at his own discretion and on his, not the client's payroll.
6. Generally, a contractor will perform all or most of the work from her own
location, be it her house or her own office. A company usually does not provide a
contract worker with tools, technology or an office to complete the work specified
in the contract. However, a contract worker may need to access company data in
order to complete the requirements of the project. There are, however, occasions
when a company will require the contract work to be done in their office. In such
cases the contractor will be provided, for example, office space and a computer.
7. A contractor is responsible for his own federal, state and local income
taxes. He also must pay his own Social Security and Medicare taxes. A
contractor should receive a form 1099 from the company. He will generally file a
Schedule C as part of his yearly income tax return. He may be able to offset his
income through deductions such as computers, office supplies and some
insurance coverage payments.