As the labor market continues to expand in complexity, there are many different types of employees found in a typical business. Companies may have as many as five or six types of employees working for them at once. Understanding the classifications of employees can help you decide which type or types are best for your organization in terms of staffing needs and productivity fluctuations. In this article, we discuss what employees are, the most common types of employees and how contingency workers are different than traditional employees.
What are employees?
Employees are individuals who are hired by a person or business to perform work for the person or business, also referred to as the employer. The IRS states that individuals are considered employees if the employer can control the work performed. Additional factors that make someone an employee include:
- The person is on the company's payroll and receives a specific salary or wage
- The individual is eligible for benefits and other perks offered by the employer
- A written or implied contract of employment
- The person is protected by law in terms of wages and employment rights
Types of employees
There are several classifications of employees and companies can hire one or many types of employees to perform work. The most common employee classifications include:
- Part-time employees
- Full-time employees
- Seasonal employees
- Temporary employees
- Leased employees
Part-time employees are individuals who work less than 40 hours a week and are typically paid by the hour rather than salaried. These employees are still considered legitimate employees of a company but may not be eligible for benefits.
Full-time employees are those that work an average of 40 hours a week and are eligible for benefits. Because the Fair Labor Standards Act does not provide a definition for part-time or full-time employees, employers are given the liberty to decide how they classify full-time employment within their organizations. Employers with 50 or more full-time employees must offer health care coverage to their full-time employees and their dependents.
Seasonal employees are those who are hired based on the seasonal needs of a company. For example, a retail company may hire 10 seasonal employees to cover the increase in business during peak seasons such as the summer months and holidays. This type of employee is eligible for Social Security and unemployment benefits as they are not considered permanent employees.
Temporary employees are those that are hired on a temporary basis, often for a set period of time such as six months. They may also be hired to work on a specific project and stop working for the company when the project is complete. Employers can hire temporary employees directly or can go through a staffing agency to find employees that fit their needs.
A leased employee is an individual who is hired by a staffing agency and then "leased" out to an organization to complete a specific job. Leased employees typically work with the company they are leased to for a year or longer. While still considered an employee, leased workers are on the payroll of the staffing agency and also receive any benefits through the employment agency rather than the organization they are working for.
What are contingent workers?
Contingent workers are individuals who are outsourced by a business to perform specific duties on a non-permanent and non-employee basis. They may work remotely or in the office but are not considered an employee of the company. Contingent workers are typically experts in their field and are sourced to complete certain projects based on their skillset. Examples of contingent workers include freelancers, consultants and independent contractors.
Contingent workers often perform under a statement of work provision that is agreed upon at the onset of the relationship with a company. Once a project is complete, the worker will no longer work for the company at that time. However, companies may utilize the same contingent workers on recurring projects if the company was satisfied with the worker's performance.
How are contingent workers different from employees?
Contingent workers are different from traditional employees in a few key ways, including:
- Contingent workers do not have access to fringe benefits such as health insurance through the company
- Contingent workers are not salaried
- Contingent workers are required to pay for and file their own taxes with the IRS
- Contingent workers have control over how and when they perform their work
Types of contingent workers
The following are the common types of contingent workers hired by individuals and companies:
- Contract workers
- Independent contractors
A contract worker is a person who is retained by an organization for a set period of time to perform a specific task or duty. How much the contract worker will be paid is also pre-determined and may be paid before, during or after the worker has completed their job.
An independent contractor is a person or firm sourced by a company to perform work or services. Independent contractors may work on a permanent basis for the company or they may work on a single project or as-needed. These workers are responsible for paying their own taxes and are not eligible for benefits through the companies they work with. Independent contractors may also be referred to as freelancers, subcontractors or contractors. Examples of an independent contractor include actors, freelance writers and auctioneers.
An intern is a person who performs work for a company on a paid, unpaid or partially-paid basis in exchange for the work experience gained. Many high school and college students participate in internships to prepare for their careers after school. Internships typically last for a few months and after this time some interns are asked to become permanent employees by the company.
A consultant is a self-employed person who offers professional advice in their area of expertise. For example, a consultant may specialize in education, law or marketing and provide companies with expert advice in an attempt to help the company improve in these specific areas. Consultants provide their services on a temporary basis but may be utilized repeatedly by a company based on the organization's consulting needs.