Contract employee vs independent contractor
- Gross pay per pay period
- $2,115.38
- Hourly equivalent
- $26.44
- Paid time off, hours a year
- 120
Every figure on this page is computed from the inputs you enter, by the method stated below it. The only constants HeadcountDesk supplies are the published federal payroll tax rates and the overtime multiplier, each cited where it is used. The defaults are a worked example to replace with your own.
A contract employee versus an independent contractor: a contract employee is an employee, on payroll with withholding, overtime if non-exempt and the employer's taxes, whose contract happens to have an end date; an independent contractor is not an employee at all, is engaged for a result, controls how it is done, uses their own tools, serves other clients and is paid on invoice. The word contract appears in both and means different things. The employee contract builder on this site writes the employee's contract, free; HeadcountDesk Pro keeps it with the classification noted.
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The contract employee
An employee with an end date. Everything else is the same as any employee: the handbook, the I-9, the timesheet, the overtime, the file. The free employee contract builder on this site writes the fixed-term contract.
The independent contractor
Engaged by agreement for a result, invoiced, no withholding, no handbook, their own tools and clients. A contractor who works your hours at your desk with your laptop is an employee wearing the wrong label.
The tests
The difference between a contractor and an employee is control and economics, not the title: who sets the hours, who supplies the tools, who bears the risk of profit or loss, whether the relationship continues, and whether the work is the core of the business. The IRS and the state apply their own versions, and the classification is theirs to decide, not the contract's.
The cost of getting it wrong
The IRS gives the employer's share of Social Security as 6.2% of wages up to the $184,500 base for 2026 and Medicare as 1.45% with no limit, and FUTA as 6.0% on the first $7,000 of each employee's wages, reduced to 0.6% with the full 5.4% credit. Misclassification means those taxes, the overtime and the penalties, back-dated. From the vendors' own pricing pages: Homebase lists Essentials at $24 per location per month billed annually or $30 monthly, with a free Basic plan for one location of up to ten employees; BambooHR lists Core at $10 and Pro at $17 per employee per month; Deputy lists Core at $6.50 per user per month. HeadcountDesk Pro is $24 a month per location.
Contract employee vs independent contractor: common questions
Is a contract employee an independent contractor?
No. A contract employee is an employee with an end date; a contractor is not an employee.
Can I convert an employee to a contractor?
Only if the relationship actually changes to meet the tests; the same work under the same control is still employment.
Is the contract builder free?
Yes. The free employee contract builder on this site writes the employee's contract with no account.
Will it do what you need for Contract employee vs independent contractor?
Tell us what your business needs and we will tell you straight whether HeadcountDesk Pro does it today, whether it is coming, or whether you are better off with something else. A person reads these and replies.