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Financial Control

WCG

By Jason Watson ()

Financial control refers to facts that show whether or not the business has the right to control the economic aspects of the worker’s job. The financial control factors fall into the categories of:

Significant Investment: An independent contractor often has a significant investment in the equipment he or she uses in working for someone else. However, in many occupations, such as construction, workers spend a substantial amount of money on the tools and equipment and are still considered to be employees. There are no exact dollar thresholds that must be met in order to have a significant investment. Furthermore, a significant investment is not required for independent contractor status since some types of work do not require large expenditures.

Unreimbursed Expenses: Independent contractors are more likely to have unreimbursed expenses than are employees. Having said that, employees can also have expenses that the employer does not reimburse. The subtle distinction can also pivot on whether the worker has ongoing fixed costs, such as liability insurance, which would suggest contractor.

Opportunity for Profits or Losses: If a worker has a significant investment in the tools and equipment used and if the worker has unreimbursed expenses, the worker has a greater opportunity to lose money. In other words, the worker’s expenses will exceed his or her income from the work. Having the possibility of incurring a loss indicates that the worker is an independent contractor.

Services Available to the Market: An independent contractor is generally free to seek out other business opportunities. They often advertise, maintain a visible business location or home office, and are available to work for others. If a worker performs services for more than one business, and can dictate how much time is spent between the various businesses, this is nearly a slam dunk for the independent contractor label. The problem is harder to define for those who work for one business.

Method of Payment: An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job, or on a time and materials basis. However, it is common in some professions, such as law or accounting, to pay independent contractors hourly.

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