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Terms and Definitions

What is a contractor?

Updated: May 22, 2024

Contractor definition and meaning

A contractor is a worker who is hired to complete a business task or job, without being considered a permanent employee. Businesses have fewer compliance and payroll tax obligations when they work with contractors, but being a contractor gives a worker more flexibility.

 

The IRS has strict guidelines that define who is a contractor and who is an employee. Businesses typically exert more control over employees and have a more enduring relationship. Contractors, who operate more independently, are responsible for paying their own taxes and at year-end. Instead of a W-2, a contractor normally uses Form 1099-NEC to file taxes.

Using contractor in a sentence

“Since we pay our cleaning crew and other independent contractors more frequently than our employees, we need a payroll service that doesn’t charge per pay run.”

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