Sign Up to receive regular distributions of The Lane Report via electronic mail. Whatever the parties believe or contract, the IRS has the final word about whether or not a worker is really an employee - and whether his or her boss can be saddled with all kinds of penalties for violating federal law. What's more, the employer might well face a slew of new and unexpected costs - FICA, unemployment insurance, workers' compensation, overtime pay and employee benefit plan contributions among them. The IRS decides who is an employee and who isn't by reference to a 20-factor test, but it all really boils down to control. If the company has the right not only to decide what job is to be done, but exactly how it is to be done, the worker is probably an employee and enjoys all the rights of employment.
Billing is a clear indicator of self-employment.
Stay away from words connoting employment. Make sure your contract denies the worker any and all benefits, including health insurance. And, finally, shift some entrepreneurial risk to the worker, who should pay all job-related expenses. As any self-employed person would, he or she should then build those costs into the fee your company is charged. Follow the rules and, in at least this one small way, you'll have a better year than Bill Gates is having.