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Avoiding Employee Classification

Because governments are concerned both about employee rights and tax avoidance, there are laws that control when someone is self employed. In other words, while you may consider yourself self employed, a company that uses your services might have to treat you as an employee even though neither of you wants that to be so.

If you are incorporated, then you are an employee of your corporation and don't have to be concerned about this. A non-incorporated consultant or service provider may run into it, however.

The rules will vary from country to country. Generally, one of the things likely to be taken into consideration is how many clients you have: if it's only one or two, you are very likely to be seen as their employee. The amount of time spent may be significant also, but another factor can be the control of the work. In the U.S, the IRS definitions include:

 A general rule is that you, the payer, have the right to control or
 direct only the result of the work done by an independent contractor,
 and not the means and methods of accomplishing the result.
 
 

But that's pretty wide open: any artist, programmer or web developer obviously has wide latitude of freedom in the "means and methods", but many are definitely employees nonetheless. There is much more to it.

If you aren't incorporated, you need to be aware of the regulations that apply to you.


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