Definition
An employee refers to an individual who works under the direction and control of an employer in both what they do and how they perform their labor. Generally, employers are responsible for:
- Paying Social Security taxes
- Withholding income taxes
- Providing mandated employee benefits
This employment arrangement stands in contrast to independent contractors, who maintain more control over their work and typically handle their own tax contributions and benefits.
Examples
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Real Estate Agent with Employee Status: In real estate, licensees (agents) who have employee status may perform a variety of tasks ranging from administrative duties to actively selling properties. They might manage a branch office or train new sales staff. Unlike independent contractors, these agents receive explicit instructions on their methodology and operations.
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Office Manager: An office manager in a corporate setting is considered an employee. They report to higher management on their tasks and strategies and participate in routine tax withholdings and benefit programs such as health insurance or retirement schemes.
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Construction Worker: A construction worker employed by a building company is given specific tasks and directions for completing a project. The employer is responsible for legal tax compliances and providing any state-required benefits.
Frequently Asked Questions (FAQs)
Q: How does an employee differ from an independent contractor? A: The key difference lies in control and responsibility. Employees are directed by their employers in what tasks to do and how to do them, while independent contractors retain more control over the specifics of their task execution. Additionally, employers are responsible for withholding taxes and providing benefits to employees.
Q: Are real estate agents always considered employees? A: Not necessarily. Real estate agents can be either employees or independent contractors, depending on their employment agreement and the level of control exercised by their brokerage or agency.
Q: Who pays for an employee’s Social Security taxes? A: Employers are responsible for paying a portion of their employees’ Social Security taxes and withholding the other portion from the employees’ wages.
Q: What benefits are typically provided to employees? A: Employee benefits can include health insurance, retirement plans, paid time off, and disability insurance, among other perks mandated by law or offered by the employer.
Q: Is training provided by the employer exclusively for employees? A: Typically, training and development programs are more frequently provided to employees to ensure they adhere to the employer’s methods and standards. Independent contractors, on the other hand, often do not receive such extensive training.
Related Terms
- Independent Contractor: An individual who provides goods or services to another entity under terms specified in a contract or within a verbal agreement, retaining control over how they perform their work.
- Real Estate Licensee: A person who is licensed to engage in the sale or lease of properties, who can either be an employee or an independent contractor.
- Branch Office: A secondary office representing a firm, which can be managed by an employee responsible for overseeing its operations.
- Human Resources: The division of a business responsible for hiring, training, and managing employees, ensuring compliance with labor laws.
- Benefits: Various forms of non-wage compensation provided to employees in addition to their normal wages or salaries, such as health insurance and retirement plans.
Online Resources
- U.S. Department of Labor (DOL): Provides resources and information on labor laws and employee rights.
- Internal Revenue Service (IRS): Offers guidelines on tax responsibilities for both employers and employees.
- Society for Human Resource Management (SHRM): A resource for HR management, offering insights and best practices for employee management.
References
- Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.
- SHRM (2021). “What is an Employee?” Society for Human Resource Management, available at SHRM website.
- IRS. (2021). “Tax Information for Employees.” Internal Revenue Service, available at IRS website.
Suggested Books for Further Studies
- “Employment Law for Business” by Dawn Bennett-Alexander and Laura Hartman
- “The Employer’s Legal Handbook” by Fred S. Steingold
- “Human Resource Management” by Gary Dessler
- “Work Rules!” by Laszlo Bock
- “The New Employee Manual: A No-Holds-Barred Look at Corporate Life” by Benjamin Gilad and Tamar Gilad
