Employees Have Differences in How They Are Classified and Paid

By hrlineup | 02.01.2020

There are mainly two types of people that can be hired to work in a business; a contract worker and an employee. There are many differences between these two but the main difference lies in the amount of control an employer can have on each of them. While it may seem that hiring a contract employee can save a business a considerable amount of money not only on salaries but on other benefits, an employer has little or no control over this type of employee.

In the definition of an employee, any person that has been hired by an employer to perform specific duties in their business can be classified as an employee of that business. An employee is hired after placing an application for an advertised job, then going through the interview process to be selected as the best fit for the open position in the business. There are all types of employees, including full-time workers, part-time employees, casual workers, fixed-term workers, shift workers, day and weekly hires, probation workers and outworkers. All these categories of employees are paid differently and their pay varies from one company to the other.

How Employers Classify their Employees?

For a much clearer understanding of how employers classify their employees, let us look into the main differences between contractual workers and permanent employees:

The Pay

From the definition on who is an employee on contract, a contract worker is a bit affordable for most businesses because such employees are only paid for the amount of work done and nothing more. For a business that is seeking to save money, an individual employee on contract will save that business a lot of money on the salaries, paid vacations, health benefits and so much more.


While it could save you a lot of money when working with contract employees, a business person does not have any control over independent contractors. Once the task is given out, it is usually up to the contractor to decide on when and how they will work on that task as long as they meet the set deadlines. For a business person that wants to stay in control over their business operations, this may not be a very good idea.


When making a decision on who to hire between an independent contractor vs employee, a business person should think about reliability. A well-established business needs to have service providers it can fully rely on to ensure that all the needs of its consumers are met without delays. The problem with independent contractors is that they are always looking out for the next gig, so there is usually no way of telling if they will be available the next time you need their services.

The hiring process is not always an easy thing for employers. Deciding on the types of employees to hire for its various departments is even harder, especially when there are advantages and disadvantages in working with both salaried and contract employees. Take time to understand salaried and contract employee definition in detail and make the right decision.