Question

Hiring a worker as an independent contractor saves an employer about 30 percent of the cost of an employee in benefits. Identify one or two of these benefits.

a) Health insurance
b) Retirement plans
c) Paid time off
d) Both a and b

Answer 1

Employers save on costs associated with health benefits and retirement plans when hiring independent contractors, as these workers must cover their own insurance and retirement savings, including both sides of Social Security and Medicare taxes.

Step-by-step explanation:

Hiring a worker as an independent contractor can result in significant savings for an employer, primarily because they do not have to provide employee insurance such as health benefits, or contribute to retirement plans like pensions and Social Security. When it comes to health benefits, employers typically contribute a portion of the premiums for their employees' health insurance. As for retirement plans, employers might offer defined benefit plans, defined contribution plans, or make contributions to Social Security and Medicare on behalf of their employees. Independent contractors, on the other hand, do not receive these benefits and are responsible for their own retirement savings and health insurance costs, including the employer side of payroll taxes if they are part of the gig economy and receive a 1099 tax statement.