Q: My employer recently changed the way we are paid. From what I understand, this now classifies me as an independent contractor, and I am responsible for paying all my own FICA and taxes. However, I am still paid the same way I always was. I don’t understand this. – Sam

J.T.: In essence, your company no longer is claiming you as a direct employee and now views you simply as a company-of-one that it is doing business with. This means you are no longer being paid an hourly wage, but instead, being paid by the project.

Dale: And if by being “still paid the same way” you mean you’re being paid the same amount, you just took a hit. Instead of splitting FICA (Federal Insurance Contributions Act) with your employer, you’ll pay SECA (Self-Employment Contributions Act), which is both halves – 15.3 percent versus 7.65 percent. Oh, and you’ll lose any employee benefits you used to have because now you’re just like the plumber they call in to fix a leak or the guy they hire to spray for bugs – just a business they hire.

J.T.: Being an independent contractor, or IC, does have some advantages. For example, the company no longer has the right to dictate how you get the job done (e.g., the hours you work). Nor are they allowed to put other demands on you that would be reflective of an employee-employer relationship. From this point forward, they should be giving you a project to work on, and your responsibility is to deliver it on time to the specifications they outlined. Also, you now are entitled to work for other companies in the same capacity, at the same time.

Dale: But because it’s easier to dump you as a contractor than it is to fire an employee – it’s like switching to a new plumber – if you don’t do just what they want, when they want it, you’ll be replaced. Some advantage.

J.T.: Taking all that into account, you should be compensated at a higher rate. In my experience, companies should be very careful when turning employees over to ICs. There are compliance laws that must be met, and if they don’t meet them, the employees can sue to collect benefits, and the company can be fined. It’s worth your taking the time to put “contractor versus employee” into a Google search engine and doing some reading.

Then meet with your company’s human-resources department and ask for clarification : and a raise!