Ordinary Wages

• Many companies that hire subcontractors make no special compensation arrangements for them. Contractors are simply paid an hourly wage identical what ordinary employees receive. However, since paychecks to subcontractors are given without income taxes withheld, you will actually receive a larger check than ordinary workers.
  
  

Half and Half

• If your subcontractor involvement with a company is specifically related to a particular job or project, you may receive a series of lump sums totaling the entire compensation for your efforts on the project. Many companies pay independent contractors half of the negotiated price at the start of the project, and the other half upon completion. If the job is expected to take a very long time, you might receive additional lump sums at predetermined points in the progression of the job, followed by a final payment when it is finished.
  
  

Employee Benefits

• Companies are not obligated to furnish independent contractors with employee benefits. Perks like health insurance, life insurance, and a retirement plan are typically restricted to full-time traditional employees only. However, many companies do offer certain benefits to subcontractors, which make the job more desirable and often attracts more contractors. Be aware, though, that some companies will pay subcontractors less money simply because they offer benefits.
  
  

IRS Considerations

• Independent contractors are responsible for paying their own income taxes, unemployment taxes, and Social Security and Medicare taxes. The IRS clearly describes the differences between an employee and an independent contractor. If the employer controls the worker's behavior, provides certain tools or reimburses expenses, and gives benefits like vacation pay and pension plans, then most likely the worker is not considered a subcontractor under IRS regulations. Section 3509 of the Internal Revenue Code explains, "If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes."