Independent contractor
Also known as: Contractor, Freelancer, 1099 worker
An independent contractor is a worker who provides services to a client under a commercial contract rather than an employment relationship. They invoice for completed work, manage their own taxes and social contributions, and do not receive employment benefits, statutory leave, or severance.
The contractor classification serves real situations: short-term projects, specialized expertise hired by the hour, freelance creative work, consultancy. The classification also gets abused — companies using contractor contracts for what is functionally employment to avoid taxes and benefits. This is "misclassification," and most jurisdictions test the actual relationship rather than the paper contract to determine whether a worker is an employee in fact.
How contractor differs from employee
- Tax and social contributions — contractor handles their own; employer handles for employees
- Working hours — contractor controls their schedule; employee's schedule is set by employer
- Tools and workplace — contractor provides their own; employee uses employer-provided
- Termination — contractor relationship ends with the contract; employee gets statutory notice and (often) severance
- Benefits — contractor receives none; employee receives statutory benefits (leave, sick, pension contributions)
- Multiple clients — contractor typically works for multiple clients; employee's primary work is for one
Misclassification — the major risk
Most jurisdictions apply a "substance over form" test: if a worker is treated like an employee in practice (fixed schedule, sole or primary client, employer-provided tools, ongoing relationship, integrated into team workflows), they will be reclassified as an employee on audit — regardless of what the contract says. Reclassification triggers back-taxes, back-benefits, statutory leave owed, and often penalties. The IRS in the US, HMRC in the UK, and the European Court of Justice all apply similar tests.
When contractor is the right model
- Genuine project work with defined deliverables and end date
- Specialized expertise hired hourly or by retainer
- Worker has multiple ongoing clients
- Worker controls how/when/where the work is done
- Worker uses their own equipment and tools
Frequently asked questions
- What is an independent contractor?
- A worker who provides services under a commercial contract rather than an employment relationship. They invoice for completed work, manage their own taxes, and don't receive employment benefits or statutory leave.
- How is a contractor different from an employee?
- Contractors control their schedule and methods, use their own tools, typically have multiple clients, and handle their own taxes. Employees have a defined work schedule, use employer tools, work primarily for one company, and receive statutory benefits.
- What is misclassification?
- Treating someone as a contractor when their actual working relationship is that of an employee. Misclassification triggers back-taxes, back-benefits, statutory leave owed, and often penalties.
- Can I hire contractors in Georgia?
- Yes, under Civil Code service agreements. The contractor invoices and handles their own tax (20% flat income tax). Avoid misclassification: if the relationship is functionally employment (fixed schedule, sole client, company tools), use a proper Labor Code employment contract instead.
- When should I convert a contractor to an employee?
- If they work only for you, follow your schedule, use your tools, and have been there over 6 months. The longer the misclassification continues, the more expensive reclassification becomes.