Recruiting

Can Employees and Independent Contractors Do the Same Work for the Company?

Hiring managers often look for the most economic or efficient way to bring new people on board. Sometimes this means hiring independent contractors, using recruiting firms, or hiring employees directly, and sometimes it means using a mix of these and other options.

contractor workers

But what if a candidate specifically requests to be an independent contractor? Or, what if you’ve got an existing employee who would prefer to be a contractor instead? Can you have multiple people performing the same role at the organization but some are employees and others are contractors?

The short answer to this question is no, not unless you want to invite Internal Revenue Service (IRS) scrutiny. The long answer is, if you do and want to be able to defend against the IRS, there are a lot of things you’ll need to do to ensure you meet all of your obligations for classifying individuals correctly.

Let’s take a closer look.

Independent Contractor Requirements

Generally speaking, if someone is classified as an independent contractor, the employer will not have control over very much, other than agreeing to the required results.

This means the employer won’t be able to dictate the individual’s hours or even how he or she gets the work done. It also won’t be able to keep the individual from working for other organizations simultaneously.

Overall, the degree of behavioral control is a key differentiator in classifying an independent contractor and an employee. However, this is just one aspect; for more detail on how this looks, check out the IRS sheet here: https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation.

In short, the employer does not have overt control over a contractor beyond requiring the person to meet his or her contractual agreed output. This is not how most employees are treated. Employees are told when they’re required to work, cannot work for others at the same time (at least not during the same schedule), and are subject to a large amount of employer control and oversight.

Independent contractors are typically responsible for their own profitability, usually have their own tools to perform the job, and are required to handle their own tax filings.

Risks of Misclassification

If an employer has people in the same role who are not classified the same, it may appear that the employer is trying to get out of its obligation to pay employer payroll taxes for the individuals who are classified as contractors. If it is discovered that one person was misclassified, it could open an entire investigation, which could uncover more problems beyond the initial issue.

This is why it’s unwise to classify two people performing the same (or substantially the same) role differently. It will only raise red flags, especially if the individuals’ duties are critical to core business operations.

The only way it could work is if the two individuals are treated significantly differently in terms of the amount of control the employer has over the workers and how they spend their time. In such a case, it would likely mean the roles would diverge enough that they would no longer be substantially the same, as the independent contractor would have different goals and requirements.

If this is something you’re facing, be sure to consult with legal counsel to ensure you’re looking at all of the important aspects and classifying individuals correctly.