Determining Worker Status: Employee or Independent Contractor?
Worker status has tax bearing. For this reason, it is important that you correctly categorize each worker that you hire.
Worker classification—employee or independent contractor—is determined by behavioral factors, the relationship of the parties, and financial controls, detailed below.
Factors that Justify Employee Status
Behavioral controls: The individual directs/controls the work to be done (i.e., how to do the work, what to do, and when to do it) or has the right to direct/control the work.
Relationship of parties: The individual does not have other clients, does not hold themself out to the public or advertise their services, can be fired or terminated, and has a continuing relationship with Rutgers that is not subject to a limited time frame.
Financial controls: The individual is reimbursed for business expenses, cannot earn a profit/loss on the business, is the paid by the hour or by the week, and works only for Rutgers.
Factors that Justify Independent Contractor Status
Behavioral controls: The individual determines own schedule, work location, and tasks.
Relationship of parties: The individual has other clients or holds self out for other business and cannot be fired, except for non-delivery of contract. No continuing relationship with Rutgers is anticipated.
Financial controls: The individual is paid by the project, has significant investment in the business, and pays for their own expenses.