Why might an employer want to classify a worker as an independent contractor?

Classifying a worker as an independent contractor offers employers significant advantages, primarily in terms of reducing overall labor costs and liability. One of the key reasons employers pursue this classification is that independent contractors typically do not receive the same benefits and protections as employees, such as health insurance, retirement plans, or paid time off. This distinction allows businesses to lower their operational costs.

Additionally, independent contractors are often responsible for paying their own taxes, which alleviates the employer from payroll tax obligations associated with traditional employees. This includes Social Security and Medicare taxes, which can be substantial. Moreover, the employer may also be less exposed to liability regarding workplace injuries or discrimination claims since independent contractors operate under their own business entities, distancing the employer from direct responsibility.

The classification does not inherently provide more benefits, job security, or enhance employee loyalty, nor does it typically relate to union regulations, as independent contractors generally fall outside the scope of union protections. Thus, classifying workers as independent contractors primarily serves the employer's interests in cost management and liability reduction.