There are significant differences between employee status and working as an independent contractor. It is important that you understand these differences before you begin working remotely as an independent contractor. It will save you a great deal of frustration and confusion.
You can work remotely as an independent contractor, which means you are self-employed but you are not required to set yourself up as a small business. That option is available but is not required to be a telecommuting independent contractor.
Before you start working as an independent contractor in a remote capacity, it is wise to have an Agreement in place that details what is expected of you, how and when you will be paid and by what means the Agreement can be terminated.
Independent contractors have more control over where, how and what work they do. The company hiring them can only be concerned with the end result of that work. They cannot tell the contractor how to do the work or provide the equipment to do it. This is why you will that some companies do not provide you with equipment or software. You have to purchase that on your own. There are some scams out there that do try to use this argument for justifying why they are selling information. Information about jobs though, is not the same thing.
People are sometimes put off the idea of working as an independent contractor because of the financial aspects. They have to become responsible for paying self-employment taxes and quite often don't realize they must be putting money aside. A common amount to put aside from each pay is 30%. By putting this money aside each pay, it will help prevent you from scrambling for the money come tax time.
Independent contractors are also able to deduct items that employees cannot. While business-use of home deductions are now being allowed, there are still restrictions on what deductions an employee can make.
Your computer, Internet access, software and other tools that you require for completion of work can be deducted on your taxes. There are more deductions and it is always best to discuss these with a tax professional in order to take advantage of all the deductions available to you and so that you don't make any errors with what you are deducting.
Independent contractors are also responsible for billing the company that they are working. The method of payment and how the company is billed should be clearly detailed in the Agreement.
Additional clauses or considerations that should be covered in your Agreement are:
- Non-compete clause - this details whether you can work for other companies, especially companies in the same line of work. Ordinarily you will be prevented from working for similar businesses at the same time.
- Confidentiality clause - this states that you will not share any information about the job with anyone outside the company. Companies do not want independent contractors working for them who will give away confidential information.
- Termination clause - normally there is a set time frame such as two weeks notice from either the independent contractor or the company. How the notice is given, Registered Mail for example can also be stipulated.
Telecommuting as an independent contractor may seem overwhelming at first, but the majority of people who become independent contractors find they enjoy the control and freedom this status brings and have no desire to return to an employer/employee relationship.
