An employee can share in successes, but often they are team successes. If the bid is not accepted, there’s no cash flow.Ĭompare, however, the opportunity for upside potential.
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Often the failure is square on his or her shoulders, and the financial consequences are immediate. A self-employed person, however, can suffer on both fronts. If something goes wrong for an employee, it may not be too bad because it’s often part of a group failure and, short of termination, the personal financial consequences aren’t devastating. I’ve always told people that a big part of the difference between the two is motivation. I’ve been both an employee and self-employed. An independent contractor must be self-motivating. An employee has the structural motivation to succeed because either the boss or the team expects results.An independent contractor may have to constantly “resell” to sponsors and be at the mercy of their end-of-year budget planning. Working for a single employer, the employee can hit a glass ceiling, be limited in career opportunities and generally feel less in control of upward mobility.An independent contractor gets to be his or her own boss. An employee gets to collaborate with others and have a social structure within the workplace. Consider the emotional positives for both.An independent contractor may have to deal with solitude and loneliness. Employees have to deal with the politics of working for a single employer. Consider the emotional negatives for both.An employee receives a salary and possible bonus an independent contractor has no barriers or upper limits to gain.An employee often has required hours an independent contractor does not.For the scientist, this could be a major distinction.
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An employee will likely have to assign any intellectual property created during employment, such as patents, to the employer. The independent contractor normally retains these rights.An employee would not have start-up costs an independent contractor will.This scientist may incur significant equipment costs unless he has access to the contractor’s lab. Independent contractors, however, often have office expenses and staffing costs. An employee will probably not have many costs beyond commuting, business clothes and other costs of the profession.While unreimbursed employee business expenses are limited in deductibility, the independent contractor can write off all reasonable and necessary business expenses. An employee does not have the same tax advantages as the self-employed for business expenses.Employer subsidized health, life, disability and retirement benefits represent part of the “hidden paycheck” for employees that independent contractors don’t always enjoy. An employee may be able to obtain better benefits than an independent contractor.