Employee or Independent Contractor?

October 7, 2009 | Subscribe to our RSS Feed

A common practice in many professional businesses is to hire new workers as independent contractors instead of employees. This practice is especially prevalent in the dental profession. The primary reason for doing this is obviously to save money. Not only is the owner not responsible for paying payroll taxes but they can also avoid extending any benefits, such as health insurance or retirement benefits, to the dentist, hygienist or assistant.

However, the question arises as to whether that new hire is truly an independent contractor or should they be paid as an employee. The Internal Revenue Service, has listed several factors to differentiate an independent contractor from an employee. They include behavioral control, financial control and the type of relationship.

Typically the practice provides the patients to be treated, the staff to assist the hired doctor and the materials he or she will use. In addition the hired professional has no say in the financial decisions of the practice. Suffice it to say that in most cases that person should be treated as an employee.

This misclassification by the practice owner could end up causing many problems if that professional should be found to be an employee and not an independent contractor. Not only might the owner’s be responsible for back state unemployment taxes, but they may be forced to pay the employee’s half of back FICA taxes. Also, the professional can file a grievance for not being offered health or retirement benefits. Be sure to consult with your accounting and legal advisers to make sure you handle the hiring of any people to your business.

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