Contract Employment Terms

• Writing is a common work function performed by an independent contractor, typically referred to as a freelance writer. Alistair Berg/Digital Vision/Getty Images

  Contract employment describes paid work performed by an independent contractor hired by an organization. Despite the fact that many employees of a company work under contract, contract employment must be delivered by someone not legally or officially considered an employee of the company. Length of hire is usually temporary, or limited to a particular project, though some contract employment is for ongoing freelance work.

Independent Contractor

• Determining whether a worker should be classified as an employee or independent contractor can be difficult. However, it is necessary that companies make the distinction for tax purposes. In its "Independent Contractor (Self-Employed) or Employee?" overview, the IRS states that a business owner is responsible for withholding income taxes and managing Social Security taxes, Medicare taxes and unemployment taxes on employees. Tax withholding is not a responsibility of the hiring business when dealing with an independent contractor. A self-employed contractor is responsible for self-reporting, though he typically receives a 1099 statement of income from the business. "Control" is the operative word that distinguishes employees from contractors, according to The 'Lectric Law Library comparison of these two work relationships. It defines an independent contractor as "A person or business who performs services for another person under an express or implied agreement and who is not subject to the other's control, or right to control, the manner and means of performing the services."

Degree of Control

• The 'Lectric Law Library expands on the importance of control with an overview of the phrase "degree of control" in a business' oversight of a worker. In an employer-employee relationship, the employer has the "right to control" (within legal boundaries) the performance of work by the employee, including such things as frequency and length of breaks. Equipment used, management of performance expectations and work schedules are among other areas an employer has the right to control. If a contract employment relationship is established in which the business has no authority to supervise or control the worker, the worker is likely an independent contractor. The 'Lectric Law Library does note that the existence of the "right" to control is the key, not whether "actual" control of the worker is exercised.

Freelance Worker

• Freelance worker is a synonymous term for independent contractor and consultant, according to the U.S. Legal "Freelance Law & Legal Definition." The term freelance worker is often used to describe contracted employees who perform paid services for multiple business or clients at the same time "who have the right to control only the final result of the individual's work, rather than the specific means used to get the work done," according to U.S. Legal. Writing, marketing and research are among common work activities in which self-employed individuals are likely to be called freelance workers.