Compliance for Contract Workers vs. Full-Time Employees

Build Your Business

Author: Linda Light | January 4, 2024

In today's gig economy, where balancing multiple temporary jobs is commonplace for many workers, some construction business owners are struggling to learn the differences between labor laws for contract workers vs. full-time employees. Some roofing companies may hire independent contractors for a big project, or in lieu of full-time employees.

So why might a roofing contractor consider hiring a contractor in addition to or instead of a full-time employee? And when you do, how do you stay compliant?

independent contractor agreement paperwork on desk with pen
Whether your roofing company hires contract workers or full-time employees, ensure you're compliant for both before starting your next project.

Contract Workers vs. Full-Time Employees

Independent contractors offer a great deal of flexibility. You can easily contract for specific services or a for a short period of time. This works well when you need a particular skill set that none of your full-time employees have, but only for a single roofing job.

An independent contractor may be more affordable in the long run. While the hourly rate you pay may be more, you don't have to pay for health care, withhold taxes or cover the cost of equipment as you would with a full-time employee.

On the flip side, the control roofing companies have over independent contractors is minimal. A business owner sets the deadlines and provides project guidelines, but the contractor is expected to work independently, set their own work schedule and ensure deliverables are met. All of those factors could mean that your project is not at the top of its priority list.

Unlike contract workers, your full-time employees know your business. They understand the type of work to be done and how to do it so that your roofing projects run efficiently. Any time you bring on a new hire, even temporarily, there is a learning curve. Independent contractors may work best for short-term projects that require specialized knowledge or experience.

Compliance Tracking

Your roofing business may choose to hire both contractors and full-time employees, but you need to ensure your business is compliant with both. For instance, you must withhold taxes, Social Security and Medicare from wages paid to your employees, but these benefits don't apply to contract workers.

Start by classifying your labor force. An employee's status is what triggers your federal and state obligations for things such as:

  • Tax documents and IRS reporting.
  • Employment laws.
  • Employee documentation.
  • Benefit management.

Don't worry about withholding taxes for independent contractors — they pay self-employment tax. In addition, contractors don't receive mandatory unemployment, anti-discrimination protection or workers' compensation. As always, you should seek the advice of a tax specialist or accountant who is familiar with the laws in your area to help guide you.

Is Your Worker Contract or Full Time?

Not all states define independent contractors and full-time employees the same way. The best practice is to apply the most stringent definitions and contact local agencies for details. However, this checklist can give you a head start:

  • Do you have a signed agreement/contract that defines the scope of work and payment terms? Is the worker only responsible for performing the services outlined in this document?
  • Does your company control what the worker does and how they perform on the job?
  • Will they be using their own equipment for the job?
  • Will they be a temporary hire?
  • Will your contractor be working with other companies or clients?
  • Will your contractor set their own hours and schedule?

Make sure you can navigate local laws with confidence, and you'll create a relationship that lets an independent contractor's flexibility benefit both them and your roofing business.

Having processes, procedures and documentation in place, so that you know what applies to a contract worker and what applies to your full-time staff, will help keep your company compliant.