• Independent Contractor

An employee is engaged under a “contract of service” while an independent contractor or consultant is engaged under a “contract for service”.

An employee is a person employed for wages or a salary and includes an apprentice and indentured learner.

An independent contractor is a person who exercises an independent employment and contracts to do specific work according to his own judgment and methods, and without being subject to the control of his employer except as to the results of the work. An independent contractor also has the right to employ and direct the action of the workmen, independently of such employer and freed from any superior authority in him to say how the specified work shall be done, or what the laborers shall do as it progresses.

  • What is the difference between an Independent Contractor and an Employee?

The difference turns on the degree of control exercised. Courts have developed the test to determine whether one is an employee or an independent contractor. The court in the case of Stanley Mungai Muchai Vs National Oil Corporation [2012] eKLR discusses the tests for determining employee and independent contractor. This include;

  • Control Test – An employee is subject to the command of the employer as to the manner in which he or she shall do the work. An independent contractor has the discretion to determine the manner in which the work is done.
  • Integration Test – Am employee is subjected to the rules and procedures of the employer rather than personal command. The employee is part of the business and his or her work is primarily part of the business. However, an independent contractor is not part of the business.
  • The test of economic or business reality – which takes into account whether the worker is in business on his or her own account, as an entrepreneur, or works for another person, the employer, who takes the ultimate risk of loss or chance of profit.
  • Mutuality of obligation – in which the parties make commitments to maintain the employment relationship over a period of time. That a contract of service entails service in return for wages, and, secondly, mutual promises for future performance. The arrangement creates a sense of stability between the parties.

In addition, an independent contractor will have his own tools to perform the work and will not rely on the employer to provide the equipment. An independent contractor is not entitled to the rights and benefits that an employee is entitled to. For example, an employee is entitled to statutory protection that applies to employees under the Employment Act, the employers’ liabilities for acts committed by employees, compensation for work injury damages, right to join trade unions, minimum wages, annual leave, paternity/maternity leave, and redundancy payments.

The payment to an independent contractor is not subject to statutory deductions such as PAYE, NSSF and NHIF. An independent contractor pays their own taxes and are responsible for actions in tort.

An independent contractor is a person who is self-employed and agrees to offer services to another for a fixed price while an employee is a person employed for wages or a salary and includes an apprentice and indentured learner.

  • Conclusion

An independent contractor is, therefore, someone who is a registered tax payer, runs his own business, determines his own working hours, employs his own tools and invoices for work done.

In order to determine whether a person is an employee or an independent contractor the courts will consider the substance of the agreement, the facts which show the manner in which the employer and the employee or independent contractor have been operating. The courts are generally of the view that the tests are to be considered jointly and are not to be used exclusively by themselves as they only serve as guides based on the facts of each case.


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