Independent contractors must pay a self-employment tax, which is the worker and employer share of Social Security and Medicare taxes. These employers are not required to withhold and file independent contractors' income tax. Independent contractors must pay their income taxes directly. This raises concerns about the under-reporting of earnings and failure to pay one's fair share of taxes. Independent contractors are less likely to receive employer-provided health benefits.
Independent contractors are less likely to participate in employer-provided pension plans.
Independent contractors are not covered by important labor and employment laws. Most state and federal labor and employment laws only cover employees. Many state unemployment insurance and worker compensation laws require employers to make contributions only on behalf of employees. Workers misclassified as independent contractors who experience periods of unemployment or who suffer workplace injuries are unable to count on these public systems of support. During these crises, these workers and their families are left to fend for themselves.