When a Contractor Isn't a Contractor Signing up contract workers instead of hiring employees can look like a good deal, because the company doesn't have to pay the Social Security, Medicare, and unemployment insurance taxes required for employees on the company's payroll. They also can get around laws designed to protect employees, such as minimum wages. With stiff competition and slow economy, expert say workers are "contractors." Although the classification may be a judgment call in some cases, it's not just a matter of opinion. Under the law, workers are employees if someone at the company decides how and when they are to perform their jobs. Recently, federal and state governments have indicated they are going to crack down with stricter enforcement and tougher penalties on employers who wrongly classify employees as contract workers. The federal government estimates that its part in the crack down over the next decade will generate $7 billion in taxes that otherwise wouldn't have been collected. Source: Steven Greenhouse, "US Cracks Down on ‘Contractors' as a Tax Dodge, ‘New York Times, February 18, 2010. Questions 1. Why might a company legitimately want to hire contractors rather than employees? How significant do you think the savings on payroll taxes would be for most employers who use contractors? 2. Given that employers may not direct the details of when and how contractors do their work, what HR challenges could result from relying on contractors?