If you’re an entrepreneur, it’s likely that you’ve heard of employment classification. It’s one of the most important decisions you’ll make as an entrepreneur, and it can either make or break your business. In this article we’ll discuss what it means for your employee to be classified as an independent contractor or employee, how each type affects taxes (and vice versa), and how a PEO helps simplify both types of relationships for its clients.
What is an Independent Contractor?
An independent contractor is a person who works for another company, but does not have to be an employee. In other words, ICs are self-employed and responsible for their own taxes. They may be hired for a specific job or work on a long-term relationship with their clients’ businesses. They also do not participate in any benefit provided by the client. These IC will have to be self-insured or pay for government contributions such as SSS, Philhealth, Pag-Ibig voluntarily
What is an Employee?
An employee is anyone who works for an employer. The person’s name, Social Security number and wages are all recorded on payroll records. Employers must pay all required employment taxes to the government and meet other obligations under such as statutory contributions driven by government mandated benefits relating to health insurance, social security and loan providing government controlled corporations.
Employees generally receive benefits like medical coverage from their employers’ insurance companies; retirement savings plans through their workplaces; paid time off (PTO) for sick days or vacation days; vacation pay for unused PTO days; training opportunities at work if you want them—and even things like company-sponsored meals at lunchtime!
What is a Professional Employer Organization (PEO)?
A Professional Employer Organization (PEO) is a business that provides payroll and benefits services to its clients. PEOs are a good option for small businesses that don’t have the resources to hire an HR department or want to keep their costs down while still providing employees with all the same benefits as traditional employers.
IC vs Employee vs PEO Comparison Table
An independent contractor is a self-employed individual who is not an employee of the company for which he or she works for. Instead, he or she is considered as his/her own employer. An employee has a relationship with his or her employer in which there is mutual benefit from the relationship: he or she provides labor to the company and receives compensation for doing so (e.g., wages).
A hybrid type of independent contractor—called PEOs—provides benefits to both parties involved in this arrangement: they take their clients’ orders while also paying them a salary or hourly rate based on how many hours they spend working on behalf of those clients each week; these types of arrangements generally fall under labor laws governing employment relationships.
IC, employee and PEO are different ways to structure your relationship with someone who performs work for you. They each have different benefits and challenges.
Considering that an independent contractor is someone who performs services for an employer, but is not considered an employee of that company, such independent contractors are responsible for their own taxes and can work from home or wherever they want.
An employee has a regular paycheck and pay increase taxes which is directly withheld from each paycheck by the employer. This means that employees get paid regularly, but also have to pay their own taxes every year. They usually work full-time hours and make up part of a larger team (like salespeople), but aren’t necessarily bound to one particular client or boss—they’re free agents!
A professional employer organization (PEO) works like a staffing agency: it acts as an employer for its workers by managing benefits like health care coverage, retirement plans and liability insurance policies that cover injuries sustained while working under contract with another business entity (like yours). Many small businesses use PEOs because they’re inexpensive compared with hiring full-time employees outright; however this type of arrangement isn’t always ideal when looking at long-term needs such as vacation time benefits or sick leave eligibility requirements.”
At last, you should now be able to understand how each of these employment structures differ from one another and why you might choose one over the other. If you are not sure which option is best for your business, then it is worth speaking with a specialist who can evaluate your situation and point out any potential issues. Once you have made an informed decision about what type of relationship works best for your company, then follow through on implementation by taking steps towards putting it into action!
Learn more about our PEO Service or we can schedule a free consultation to help us learn more about your business requirements. Get in touch with one of our sales representatives at +639772415709.