Answer:
Employees and Independent Contractors
a) The Differences are:
1. Nature of each position: The employee is a worker who is engaged in a contract of service with an employer. She earns a periodic salary based on a fixed time per week, e.g. 40 hours per week, Monday to Friday. On the other hand, a contractor engages in a contract for service. She is engaged for a fee to carry out a specified assignment or project. The independent contractor is self-employed. She can work for many other organizations and for any number of hours.
Hours worked: The employee works some fixed hours per day and per week. An independent contractor does not have any fixed hours of work. She can choose to work more than 40 hours per week.
Control by Employer: For the employee, the employer dictates most of the details about the work. She can be given any work by the employer. She enjoys sick leave and other emoluments. She lacks discretion on which tasks to work on. She does not have "authority to hire assistants." The independent contractor does her work to suit her convenience, but ensures that the customer is satisfied with her work to enable contract renewal.
b) Examples of Employees and Independent Contractors from the case study:
i) Employees:
1. Jack Walker, Grant Worthington, and Phil Costello, salespeople
2. Cooke, an administrative assistant
ii) Independent Contractors:
1. Martha Winslow, a seamstress by trade
2. Stephanie Russo, Web Advertising Consultant
3. Luck Johnson, Cleaner
Explanation:
The general rule for differentiating the two types of workers is that an independent contractor directs the result of the work and not what will be done and how it will be done. Her earnings (fees) are subject to Self-Employment Tax. The employee does not control the result of her work and the tasks, but can control how it will be done. Her earnings are subject to Paye Tax.
