An employee is on a company's payroll and receives wages and benefits in exchange for following the organization's guidelines and remaining loyal. A contractor is an independent worker who has autonomy and flexibility but does not receive benefits such as health insurance and paid time off.

Is it better to work as a contractor or employee?

An employee may be able to obtain better benefits than an independent contractor. ... An employee will probably not have many costs beyond commuting, business clothes and other costs of the profession. Independent contractors, however, often have office expenses and staffing costs.

Why do companies hire contractors instead of employees?

This is because employees are considered the most expensive cost to any company, and the most risk. Companies address these costs by hiring long-term contractors. When engaging a professional, a contract staffing agency takes on the risk, finances the employees' benefits, and matches all taxes.