You have decided to start your own business. Congratulations! Before you begin searching for viable employee candidates in Colorado, learn how to tell the difference between a regular employee and an independent contractor.

Misclassifying employees can land you in legal hot water. With help from the U.S. Department of Health and Human Services, you can do what is best for you and your employees, no matter their legal classification.

Regular employee

A regular employee has the protections of state and federal labor and employment laws. Your regular employees are more likely to interact with Human Resources during the hiring and onboarding processes. You have employees fill out a W-2 form for all tax withholding purposes. Standard employees also receive either a salary or hourly wage, and they have a regular pay period. There are also federal and state laws regarding when employees should receive regular payment.

Independent contractor

 Unlike regular employees, independent contractors are not protected by employment or labor laws at neither the federal nor state levels. Rather than a regular application handled by HR, independent contractors usually sign a contract with one of your departments or a specific employee at your company. You will have your contractors sign a 1099 form for tax purposes, rather than a W-2 form. Finally, contractors can send an invoice and receive a check in the mail or electronically. They can receive payment either once a contract is complete or through a weekly, daily or hourly amount.

This information is only intended to educate and should not be interpreted as legal advice.