1. Why would an employer prefer to classify a worker as an independent contractor versus an employee?

2. Alternatively, from the individual worker's standpoint, what are the pros and cons of being an employee versus an independent contractor?

Please help me reply to this discussion post below...thank you!

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1. Why would an employer prefer to classify a worker as an independent contractor versus an employee?

One of the duties of an HR department is the classification of workers (independent contractor, common-law employee, statutory employee, statutory non-employee). Worker classification determines benefit allotment (insurance, pension/retirement, paid leave, overtime, etc.) and the required taxes paid for by the organization (income, unemployment, Federal Insurance Contributions Act (FICA)-Social Security/Medicare). Independent contractors do not receive benefits from the healthcare organization and are therefore subject to self-employment tax on their earnings. Back taxes and incurred penalties could result from the misclassification of a worker.

2. Alternatively, from the individual worker's standpoint, what are the pros and cons of being an employee versus an independent contractor?

Employees and independent contractors have employment obligations to the healthcare organization- the difference, generally speaking, pertaining to independent contractors is that the employer has the right to control/direct only the result of the work and not the means and methods of accomplishing the result. I think some of the pros and cons are interchangeable, depending on your viewpoint.

EMPLOYEE-

Pros:

• Benefits are stated up front with minimal effort required in choosing (some healthcare systems have limited options regarding insurances, retirement/401Ks, investment opportunities, etc.)
• On-the-job training for most positions
• Typical guaranteed regular wage or salary
• Potential to foster stronger employee-employer relationship

Cons:

• Less flexibility with wage/salary negotiations and work schedule
• Less likely to directly experience a financial profit
• Difference in tax deductions available to independent contractors for work expenses

INDEPENDENT CONTRACTOR-

Pros:

• Ordinarily use their own training methods to provide the services
• Often paid a flat fee, which could warrant a higher wage than an employee or profit
• Flexibility for choosing contracts/work schedules

Cons:

• More likely to have unreimbursed expenses than employees
• More likely to have significant financial/time investment to provide the service than employees
• Could experience a financial loss
• More expensive self-provided benefits vs. employer-provided, which also inhibit areas such as worker's comp/unemployment
• More likely to create impermanent relationships with contracted employers

Department of the Treasury-Internal Revenue Service. Employer's Supplemental Tax Guide (Supplement to Pub. 15, Employer's Tax Guide), Publication 15-A. Cat. No. 21453T. 13 Jan. 2022.

Showalter, Stuart.The Law of Healthcare Administration,Ninth Edition. Health Administration Press, 2020.