Contract Worker vs. Full-Time Worker: What Differences Do They Have and What Benefits Are Offered For A Business


A Look At Full-Time Employees

Full-time employees are W-2 employees, working directly with the supervisor who maintains control over the work during the working relationship. The employer takes care of all the payroll taxes and offers them certain benefits such as group health insurance, retirement benefits, etc.

The IRS defines full-time employees for businesses as:

  • Controlling behavior – The employer may define what a worker can do and how it is done.
  • Controlling finances – The employer controls when the worker gets paid and how much. The employer takes care of all the supplies and equipment and does the payroll as well.
  • Employer relationship – The employer offers the worker fringe benefits, and the relationship is an integral part of the company.

Any small business that does this work on behalf of an individual can consider that person a full-time employee.

What Benefits Do Contract and Full-Time Workers Have For Businesses?

Small businesses can benefit from hiring full-time employees while also working with contract workers, which include:

  • Costs – Contract workers charge more than what a business pays its employees, but their benefits and tax liabilities are less (nearly non-existent), so the company pays much less.

Project Scope

 If a business has a short-term project to contend with, hiring a contract worker may be the better option. This kind of project may include seasonal assistance, technical consultations, etc.

  • If the work is ongoing, full-time employees will be the better option.
  • Allegiance – Contract workers can stop working for a business to work with another if the pay is better, or they may not have as much time for their other clients. Full-time employees remain with the company, especially if the company provides them with looked-for benefits.


Small businesses can hire full-time employees and contract workers to meet their needs and goals, but classifying them correctly is essential in remaining tax-compliant.