What is an Independent contractor?

June 24, 2012 · Posted in Business 

There is an increasing trend towards working independently as freelancers and contractors. A contractor is a person or small corporation that works with a company for relatively short durations. They do not work permanently, but on a contract basis to provide certain services based on their expertise. Employment as a contractor is often considered by those who wish to work on their terms and conditions, rather than being bound by policies and supervised by someone else. They normally have more control over the type of work they do and how they do it.

For businesses, hiring a consultant or contractor usually solves a problem. When a project requires outside expertise for a short time, contractors are the solution. Hiring a permanent employee for short-term projects is not a viable option since they become unnecessary when their skills are no longer needed. So getting an expert to do the work on contract is a much more cost-effective option for the company.

Independent contractors encounter unique advantages and disadvantages. Since they are not employees, they can negotiate terms and conditions which are different for company’s permanent employees. They can accept work from multiple clients at one time, which provides extra stability.

Working sporadically, they can also pursue multiple interests. Being one’s own boss without company rules and supervisors appeals to many. The ability to choose what work they need to do rather than being told what to do is also appealing. They can still set their own schedule because they are paid on the basis of actual hours worked.

Disadvantages are that in some countries, there are different tax rules for permanent employees and contractors. They may not enjoy various services and non-monetary benefits like medical insurance, pensions and other compensations. There is always some uncertainty as they mostly work on short assignments and have to keep looking for new ones.

Often operating as a sole proprietorship or single-member limited liability company, solo contractors incur some extra taxes and have to track their own business taxes and income. Potential legal implications of breach of contract can result in permanent disqualification. Buying their own equipment gets very expensive, too.

Horrice Grunt is a widely respected writer who has been writing for 5 over years often writes on www.brac-group.co.uk and a wide range of other subjects.

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