Let us first get a working legal vocabulary. An employee is a person hired by another to perform a service, generally for wages or a salary and is under the other's control. While the distinction may appear to be academic, understanding the distinction is critical to the business professionals' assessment of the needs of his company. Employers are responsible for withholding income, Social Security and Medicare taxes from their employees' paychecks. They are also responsible for matching certain withholding taxes.
Employers incur no such obligation on behalf of the independent contractors that they hire.
Many professionals starting their own businesses mistakenly believe that the simple designation of a person as an independent contractor relieves him or her of responsibility for taxes. The test lies in the right and exercise of control one employs over the details of the work of the person hired to perform the task or service. Once the employer controls the details of another's work, that person loses the status of independent contractor and becomes an employee. The business professional is wise to consult a tax accountant or attorney for the details of the IRS test in this regard. Recall that workers' compensation premiums are based in part on the number of employees you have as well as the nature of the work performed by your company.