Independent contractor agreements are usually different from a standard employment contract. An independent contractor agreement requires you to work with an employer. A standard employment contract requires you to work for the employer.
A good example of a professional with these types of contracts is a physician contract. A physician-independent contractor agreement will need you to work with a hospital. But you’ll not be an employee. Working as a physician independent contractor means one is a freelance doctor; working with them and not working for them.
Independent contractor agreements have many aspects that differ from employment contracts. There are important things to look for in your independent contractor agreement. The key elements that distinguish independent contractor agreements from employment contracts are
- Job description
- Details of your responsibilities
- Compensation
- Terms
- Start and end dates
Keep this in mind before signing your next contract. Read on to understand the pros and cons of being an independent contractor.
Pros of Being an Independent Contractor
An independent contractor position has many benefits. Some of the benefits are
Flexibility and Freedom
Independent contractors have more freedom despite their profession. For example, physician-independent contractors can choose where to work. They’ll not have to move to get to work easier. They can decide the exact employer they want to work with.
As long as they meet the specific expectations that the contract involves. For example, they should see a certain number of patients per month as an expectation.
Your employer places few restrictions on you as an independent contractor. This offers flexibility. Flexibility gives you more control. You can choose situations where you can put in your best work. This promotes a functioning work-life balance. This also means the potential to earn more. You can take on other jobs and earn a passive income.
Tax Benefits
According to this Inc Authority review by SmallBusinessHQ, independent contractors who have registered an LLC with the agency have full responsibility to make tax payments on their own. This gives them the ability to make necessary deductions to decrease tax liability.
They can deduct many business expenses during the tax period. Business expenses can include home office supplies. Deductions help independent contractors to keep more money in their pockets.
Insurance Options
As an independent contractor, you can choose any insurance plan affordable. This means there is no limit to which plan you can choose, as with employer plans. This will be an individual insurance plan. When you switch jobs, you will not need to apply for new insurance coverage.
Disadvantages of Being an Independent Contractor
The cons of being an independent contractor are:
No Special Benefits
Employers do not provide benefits packages. Independent contractors do not qualify for employer-sponsored health insurance. They are also not eligible for life insurance, or a retirement plan. You’ll have to search for these insurances yourself and make the payments.
Tax Withholding
Independent contractors are self-employed and don’t have their taxes withheld. IRS and your state government will need you to make income tax payments.
Other cons include
- You’ll have to make manual deductions for Social Security and Medicare
- Unlike being a standard employee, there is less stability
Conclusion
A majority of independent contractors know the pros are many more than the cons. Some cons of being an independent contractor mentioned have their advantages. This all depends on one’s perspective. For instance, employers don’t provide health insurance to independent contractors. This gives them the opportunity to pick any health insurance plan they want.
Independent contractor agreements differ from standard employment contracts, as discussed. We’ve given a good example of how a physician-independent contractor agreement works. Understanding the pros and cons of being an independent contractor is important. It does not matter whether you’re a physician or are in another profession. The pros and cons will help you choose the right contract agreement that works for you.
Author Bio:
Heather Blacksmith has a Bachelor's Degree in Finance and works at a finance firm based in Seattle, Washington. She specializes in small business finance, credit, law, and insurance. When she is not working, she spends her time in her favorite coffee shop writing on various finance-related topics. Other than that, she enjoys adult coloring books, recycling, and running.
