Knowing the distinctions between employees and contractors will help you make informed decisions about your business’s needs, especially when there are country-specific nuances. Some differences are subtle, but being clear about the type of worker you’re hiring can help you avoid issues with the IRS and other tax agencies.
Employees provide companies with long-term services and job functions. They are employed by Oyster to work for your company, not for themselves.
Contractors often provide companies with specialized services for short-term or project-based needs. They work under independently written contracts to provide services for companies and are self-employed (their own business entity).
Employee vs Contractor
Below are some of the key differences between an employee and a contractor.
| Employee | Contractor | |
| Type | A person employed by Oyster on your behalf | A person or business temporarily paid through Oyster for some business purpose |
| Hiring | Third-party entity, Oyster enters into an employment contract with a Team Member who will provide services to you | Direct, services agreement is directly between the contractor and the customer |
| Compensation | Receives regular, fixed payments | Two options: 1) Fixed auto-generated invoices where you are paid the same amount each pay period, or 2) Pay As You Go invoices that are manually created each pay period |
| Taxes | Shares taxes responsibility with the employer | Responsible for self-employment taxes and filling out necessary tax forms (files W-9, 1099, or W-8 forms); receive a flat fee with no deductions |
| Tax Rates | Country-specific individual taxes that are deducted by employers | Self-employment tax rates vary by country; consult a local qualified tax consultant for more information |
| Benefits | Receive all mandatory statutory benefits according to country of employment. These can include health insurance, paid time off, sick leave, etc (as these may vary) | Doesn’t receive statutory benefits. Note that any paid time off or benefits associated with eligible contractors becomes the responsibility of your Company rather than Oyster |
| Flexibility | Employees receive instructional oversight from their employer | How and when you fulfill the service agreement with an employer is up to you |
| Oyster Pricing | Varies by country | $29 USD/month per contractor |
Misclassification Risks
If you misclassify an employee for a contractor, you could face stiff penalties and fines as repercussions. The consequences for misclassification vary depending on whether the misclassification is deemed intentional. To avoid this, use our Employee Misclassification Analyzer to learn more about employee classification and country-specific legalities.