HR Fast Facts: Understanding Employment Types
It’s important to know the different employment types used to correctly classify your workers when you hire them. Learn about the differences between Employees and Contingent Workers, based on U.S. rules and regulations below.
Employee
Anyone who has defined job duties within the organization, completes an I-9 form for employment eligibility, and receives a W-2 at the end of the year for earned wages.
NOTE: The Department of Labor released guidelines around paid and unpaid internship programs under the Fair Labor Standards Act. Employers deciding whether to compensate their interns can view the guidelines here.
Contingent Worker
Anyone hired on a contingent or limited basis.
Company-paid Temp – A temporary worker hired directly by your company whose pay is managed by your company. This worker’s engagement is for a fixed period of time and not intended to be indefinite. For example, a temporary employee hired to cover for an employee who is on parental leave. An employer may fill out an I-9 form for these workers, and provide a W-2 form.
Independent Contractor – A worker selected directly by a company to complete work for that company. Independent contractor classification is governed by both state and federal law and should be carefully evaluated before classifying a worker. Independent contractors generally do not perform the same type of work as regular employees. Tax filings for these workers are managed by the employer, including 1099s for payment received.
NOTE: Misclassifying a worker as an independent contractor can have legal and financial impacts on your business. Please carefully review all applicable legal requirements prior to classifying a worker as an independent contractor.
Agency-paid Temp – A temporary worker hired by a third party and assigned to work for your company. One example would be a worker assigned to a company during peak work periods to provide staff augmentation. Taxes and any eligible benefits are typically handled by that third party
Vendor Employee – A worker hired by a third party and assigned to work for your company. Vendors are usually engaged to work for a company when that company has outsourced a particular function to said vendor. For example; a security guard who works onsite at an office where the security company was hired to handle all of physical security needs. The worker’s payment and benefits are often handled by that third party.
Volunteer – Anyone volunteering their time, without expectation of payment or benefits, hired directly by the company to work without wages or benefits.
*DISCLAIMER: This does not constitute legal advice. This article is for informational purposes only.
