The U.S. Department of Labor defines contingent workers as independent contractors or freelancers as opposed to employees. When a company hires an employee on a permanent or temporary basis, it becomes responsible for ensuring that taxes are deducted and paid for the employee. On the other hand, when the company hires an independent contractor or contingent worker, the IC becomes responsible for all taxes, as she works for herself. The difference between the two types of employment is defined by whether the worker is classified as an employee or a freelancer.
Contingent Workers
Contingent workers are typically defined as people who are not employees of a company. Instead, these workers are freelancers who might work under a contract, on a temporary basis or provide consulting services as needed. Many companies consider salespeople as contingent employees. Instead of receiving a salary, a contingent worker receives payment or commissions for completed work. Contingent workers cannot be told how to complete a project, as they work for themselves. The company's focus with contingent workers is not how the work gets done; the focus is on the results.
Contractual Employees
All employees who are hired in states with at-will employment guidelines are contractual employees whether there is a written agreement or not. The IRS defines these employees as common-law employees. At-will employment allows an employer or employee to terminate the work relationship at any time without cause. As long as employees meet the rules of employment, and work continues to be available, their "contract" for work continues. Violations of the contract, such as disciplinary actions or company violations may result in the ending of the contract. Contractual employees might work on a permanent or temporary basis. Contractual employees have taxes withheld from their paychecks and might be eligible for benefits dependent upon company policy and employment laws.
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