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Independent contractors — Iowa

There are advantages and disadvantages to employers using independent contractors. Employers are required to pay certain benefits as well as federal, state and local taxes on behalf of their employees. As such, the financial benefits of having a large independent contractor workforce may be significant. However, it can be extremely burdensome for employers to monitor what qualifies someone as an independent contractor, and the penalties for misclassification can be costly. 

For employees, the employer must withhold taxes under the Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) in accordance with the Internal Revenue Code (IRC). Organizations are not required to perform these withholdings for independent contractors. While employees participate in employee benefit plans, independent contractors do not. Therefore, it is apparent that there are a few potential areas of savings for employers who choose to use independent contractors.

Various federal and state employment laws, including laws governing health and safety, wage and hour, and equal employment standards, protect employees but not independent contractors. Independent contractors are not counted for purposes of determining coverage under these statutes and they cannot pursue the statutory remedies available to employees. Federal employment laws that cover employees but...


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