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Considering Contract Work?

Adapted from a National Association of Colleges and Employers (NACE) resource titled “Considering an Opportunity to Work as an Independent Contractor?”

For many individuals, self-employment as an independent contractor can be a rewarding and satisfying career option. As is true with any employment relationship you enter, it is important to understand the roles and responsibilities of everyone involved.

What would my employment status be as an independent contractor?

Independent contractors are self-employed and enter into a contracted agreement to provide services to a client in exchange for an agreed upon fee (lump sum, hourly, weekly, monthly, piecemeal, per assignment, and so forth.). Independent contractors are not placed on an employer’s payroll; instead, the independent contractor typically invoices the client for work performed, and the client pays the independent contractor directly. The client does not withhold federal, state, and local taxes from the payment, and the independent contractor is responsible for satisfying all tax obligations. All income earned during the course of a calendar/tax year is reported to the independent contractor and to the federal government by the client on form 1099.

Who might I work for as an independent contractor?

Many organizations, large and small, engage the services of independent contractors. You’ll find that independent contractors work in a wide variety of industries, such as consumer products, transportation, technology, manufacturing, real estate, education abroad and so forth. What is known as the “gig” economy is growing and is defined as a ”labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.”

How will I be paid?

Organizations typically disclose the terms and conditions of payment through a written compensation agreement. The terms of each applicable pay structure should be spelled out clearly in writing and agreed to by all parties before work is performed. The agreement should also clearly explain how payment disputes are settled. (Note: As independent contractors are self-employed, any dispute involving payment would be resolved either independently or through potential litigation to collect amounts that are due and owed.)

Are independent contractors eligible for benefits offered by an employer to its employees?

No. A genuine independent contractor is not eligible for benefits the client makes available to its employees. The independent contractor is self-employed and therefore responsible for his/her own benefits such as health insurance and retirement benefits.

Are there risks and responsibilities associated with being an independent contractor rather than an employee?

Self-employment may involve some risks and responsibilities that employees typically don’t assume. For example, the independent contractor may assume all responsibility for tax obligations, handle his/her own benefits, manage billing and collections, maintain appropriate licensing and insurance, and accept legal responsibilities and exposure associated with performing the job. However, for many people, the benefits of working independently greatly outweigh the added responsibilities.

Am I protected by the same employment laws as an employee?

The area of employment law is very complicated, and laws vary by state; questions about specific situations should be addressed to legal counsel. In general, however, independent contractors are not protected by employment laws since they are self-employed. This underscores the critical importance of a written agreement that spells out how the relationship will function, what the expectations are on both sides, and how payment and work performance will be handled. Claims for workers’ compensation are also generally available only to employees, so if you are injured at work you may be prohibited from filing such a claim.

As with all job search decisions, seek advice and know the details prior to committing. Consult with Engineering Career Services regarding career questions and consider speaking with Student Legal Services for any contractual and legal concerns.

"The only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle." - Steve Jobs

About the author

Ashley Taylor

Ashley Taylor is a Career Counselor at Engineering Career Services.