Independent Contractors: The Changing Workforce of America

According to the 2015 Bureau of Labor Statistics, 40% of the American workforce consists of “contingent” jobs, meaning that work which deviates from the traditional 9-5 plus benefits and is a more unstable source of income (Forbes.com). These types of jobs are mainly self-employment, independent contractors, temps, or on-call and part time workers. The advantage to being one of these workers is that there is a lot of independence and flexibility, as well as working in a career of the worker’s choosing.

Independent contractor versus full time employees

The distinction between being a full time employee and an independent contractor largely depends on whether the individual offers their skills, their business, or their profession to the general public. These individuals market their specialty to draw in multiple clients. Some examples are medical practices, accounting firms, or general contractors looking for freelance opportunities in the arts. Independent contractors provide their own resources, sub-contractors, business records, and have a separate business bank account. Meanwhile, a full time employee will often work for just one company and fulfill their duties as structured by that company. Training may also be included to help build skills for their contribution within the company. Full time employees also have higher labor costs, which frequently include benefits. Many companies these days refrain from hiring people as full time employees to save on tax and medical insurance costs.

Avoiding possible conflicts in the employer-independent contractor relationship

Flexibility can work well between an employer and independent contractor, indeed there must be this flexibility in order for this relationship to exist, but an independent contractor is still dependent on the demands of the company they work for. There should always be a contract with terms that both parties agree on for the duration of the contractor’s service. When an employer has an employee, there can be legal protections for that employment, but for an independent contractor, employment is always “at will”, which means that they can dismiss the contractor at any time without a reason. Additionally, many laws that cover full time employees, (like the Fair Labor Standards Act, The Civil Rights Act of 1964 and the Employee Retirement Income Act of 1974) are not guaranteed to protect or affect independent contractors. Contractors are easily replaceable since there are many other people marketing themselves for the same service. The success of the independent contractor depends on their ability to seek out demand for their services by being responsible for their own marketing and advertising, and to distinguish themselves from other contractors.

As the job market increasingly heads towards Forbes definition of “contingent” jobs, you might be interested in creating your own business to further a talent that you prefer over a full time job. You can protect yourself by implementing a business contract for every project accepted and find out how to do your taxes by consulting IRS.gov. However, what you gain in freedom and flexibility, you lose in stability. If you have questions relating to how to start a business as an independent contractor, seek out the expertise of self-employed people you know, or contact an attorney.