Employee

HR Glossary for HR Professionals

Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Employee

What is an Employee?

An employee is someone who performs a service for a company. In general, a business owner must withhold income taxes, withhold and pay Social Security and Medicare taxes, including unemployment tax on wages paid to an employee.

For instance, the IRS classifies a worker as an employee, if: 

  1. The person performs services for an organization.
  2. If the organization can control what will be done and how it will be done. 
  3. They earn a specific wage/salary. 

The difference between an employee and an independent contractor (self-employed):

A company might pay an independent contractor and an employee for the same or similar work, but there are legal differences between the two. 

For an employee, the company withholds taxes, Social Security, and Medicare for wages paid. 

For an independent contractor, the company does not withhold taxes. Additionally, employment and labor laws do not apply to independent contractors.

Why is it important to designate what an employee is?

As mentioned above, it’s important to designate the difference between employees and independent contractors in your workplace for tax purposes. If an employer accidentally classifies an employee as an independent contractor, the employer will be liable for all employment taxes that haven’t been paid.

Related Terms: Independent Contractor, Employee

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