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In most cases, contractors are responsible for providing their own Workers Compensation Insurance and are not eligible for Unemployment Insurance if their services are no longer needed.
Difference Between Independent Contractors and Employees Independent contractors have more control over their work than employees, who are generally subject to the control of the companies for which they render services. The distinction is important.
The law further states that independent contractor status is evidenced if the worker: (1) has a substantial investment in the business other than personal services, (2) purports to be in business for himself or herself, (3) receives compensation by project rather than by time, (4) has control over the time and place ...
Employees are protected by federal laws concerning minimum wage, overtime, and certain benefits. Independent contractors have no such legal protection. Still, independent contractors have the freedom to work on their own terms and can negotiate contracts with employers.
Pay basis: If you pay a worker on an hourly, weekly, or monthly basis, the IRS will consider it a sign the worker is your employee. An independent is generally paid by the job, project, assignment, etc., or receives a commission or similar fee.
The Virginia Workers' Compensation Act requires employers with at least three employees to provide insurance that covers work-related injuries and illnesses for all employees. However, independent contractors are not eligible for coverage under the workers' compensation policy for the company they are working for.
For the employee, the company withholds income tax, Social Security, and Medicare from wages paid. For the independent contractor, the company does not withhold taxes. Employment and labor laws also do not apply to independent contractors.