open for business updates


We won't send a ton of junk, just the good stuff.


Independent Contractor...or Payroll Employee

Hiring payroll employees is a BIG responsibility, requiring extra paperwork, costs and complying with labor laws.
Employees should be seen as a valuable asset to your company and in return you should be able to take care of them.
You pay a “company share” (or half) of their Social Security and Medicare taxes, which is 7.65 percent of their gross pay; and Unemployment Insurance, which is at an experience rating, anywhere between 0 percent and 7 percent of their gross pay. You withhold the employee’s share and pay it when due. You also pay Worker's Compensation Insurance and maybe other benefits.
Hiring an independent contractor is usually more expensive because they, or their firm, bear these responsibilities at their own expense.
You must request a Form W-9 from them if you pay more than $600 per year. Then at the end of the year, prepare Forms 1099 and 1096 to report what you paid them.

The IRS gives us three things to consider from Form SS-8:

Behavioral Control:

Payroll Employee
You give instructions on how to do the work
You train the worker on how you want it done
You control the worker's time and activities

Independent Contractor
The worker comes fully trained and equipped to do the work
The worker is free to come and go as needed
The worker has their own business and brings services to yours

Financial Control:

Payroll Employee
You set the rate of pay for the worker
You set the hours for the worker
You pay the taxes for the worker

Independent Contractor
The worker sets their own rate and pays their own taxes
The worker invests in their work (tools, insurance, knowledge)
The worker is not necessarily reimbursed for expenses

Relationship of the Parties:

Payroll Employee
You pay vacation, holidays, sick pay, etc.
You must pay unemployment on the worker
You may need the worker to be permanent

Independent Contractor
The worker is independent and can do work for other businesses
The relationship can be terminated by either party without incurring liability or penalty
The worker makes a contract with you for services provided

About the Author

Connie Harvey
Owner Efficiency Counts

Connie Harvey is in her eleventh year in the business of helping other businesses do a better job of tending their books. She is a 2004 graduate from McCook Community College and is a QuickBooks ProAdvisor. She also serves on many financial boards. 


Tell A Friend

Tell a Friend



Check out this article from Open for Business Magazine!
Captcha Image

Submitting Form...

The server encountered an error.

Form received.

Captcha Image

First National

Taxes, Change and Planning14-Oct-2015

Your Family Business Family-owned businesses come in different shapes and sizes, from Walmart to small home-based organizations. ..

Investing in Education15-Jul-2015

Will Nebraska come out ahead? Nebraska is a large and diverse state. Our public schools have an enrollment of over 300,000 ..

No Iron-Clad Equation20-May-2015

Local artist shapes career path from passions As a graduate with an art degree from Hastings College, owning my own business wasn&rsquo..

Growing with Grants10-Mar-2015

Boost your organization There are a variety of direct and indirect grant opportunities available for the Nebraska agriculture indust..

Deductive Reasoning13-Jan-2015

Tax savings + business improvements = success With the new year upon us, we welcome many opportunities to better ourselves while also imp..

Above the Bar05-Nov-2014

McDermott & Miller CPAs explain: cross-training pays off in in the professional world When customers become clients, ..

The Price Tag of Help11-Jul-2014

Independent Contractor...or Payroll Employee Hiring payroll employees is a BIG responsibility, requiring extra paperwork, costs and comp..

ROI on Happy Employees01-May-2014

CSR reaches beyond recycling Social responsibility isn’t just about recycling, saving energy and donating company profits. The way a c..

Once Upon a Time there was a Bank Account02-Apr-2014

The story behind your numbers The timely completion and receipt of interim and annual financial statements are critical to the success a..

Cash Flow21-Jan-2014

Blueprint for Your Business Numbers There are several important factors to consider when putting together the financial plan for a new b..

Our Partners:

© 2015 Open for Business Magazine, LLC  All rights reserved