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Understand the difference between employees and independent contractors

SOLVEDby QuickBooks5Updated 1 week ago

Learn the basics about classifying a new worker as an employee or an independent contractor.

Deciding if you can hire someone as an employee or independent contractor is a big decision. It impacts taxes, what you need to do for payroll, and more. The government has a lot of rules around this, but here is a basic overview and some links that may help you.

Employee vs. independent contractor

An employee is a person hired by an employer. An independent contractor is a self-employed person who provides services to businesses, generally on their terms. An employer generally has more control over an employee than over an independent contractor. 

Use HMRC guidelines to determine your worker classification.

If your worker is an employee, you must:

  • Withhold taxes.
  • Contribute to the employee's pension on employee earnings.
  • Pay National Insurance.

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