People
Worker classification
Worker classification is the determination of whether a person is an employee or an independent contractor for tax and employment law purposes. US classification turns on behavioural control, financial control and the nature of the relationship, and some states apply stricter tests than federal law.
In plain terms: Deciding whether someone is staff or a contractor. The label you use does not decide it.
Why it matters
The most expensive unforced error small companies make with people. A full-time worker following your schedule, using your systems, with no other clients, is likely an employee whatever the agreement says.
Common misunderstanding
Believing a signed contractor agreement settles it. Substance governs, and states apply their own tests.
Read the full guideFounder operationsRelated terms
Source: IRS — Independent contractor or employee. This is a definition, not tax or legal advice — verify against the primary source before acting.