Set Boundaries When Working with Contractors

By Barrie Gross

My company uses a lot of contractors, and we treat them much like our employees. Is that a problem?

It is not a good idea to treat contractors the same as regular employees. By definition, a contractor is in a different relationship with the company and it is important to set boundaries so that the difference in the relationship is maintained.

Among other things, contractors do not receive employee benefits from the company, like health and disability insurance, and they pay their own taxes. Employers do not pay payroll taxes for contractors like they do for employees. If a contractor is reclassified as an employee by a government agency or court because the contractor was, in fact, treated like an employee and did not meet the contractor tests that different agencies use, it can be very costly for the employer. Employers can be held liable for overtime, employee benefits, various taxes, statutory penalties, etc. These are very expensive penalties, as Microsoft learned in the late 1990s when scores and scores of contractors and temporary workers were reclassified as employees.