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Employee

An employee is a person who works for an employer in return for compensation, usually either salary or wages.

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Expanded Definition

An employer is reponsible for collecting withholding taxes from the paychecks of its employees. The employer is also responsible for payment of certain taxes including FICA for Social Security and Medicare and usually workers compensation and some other payments required by some states. They may also pay for and provide benefits, typically including vacation pay, holidays, and health insurance. An employer is responsible for paying overtime when required by overtime laws.

In contrast a company that hires a self-employed contractor pays none of these costs. The contractor is responsible for providing his own benefits and paying his own taxes.

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