What is an employee and what is a contractor? How do I tell them apart?

Determine which one before paying:

Employee

• Near 100% direction: assigned and directed during working hours.
• Must be provided labor and health insurance (part-timers under 12 hours a week may skip health insurance).
• Salary income must be reported at year end. Record payroll monthly; we reconcile with you at year end.

Contractor (outsourced work)

• A freelancer with roughly 50% direction: delivers results by a deadline, but how the work is done is not directed, e.g. an outsourced design project.
• Paid and reported via a "service fee slip".
• No labor or health insurance required.

Misclassifying an employee as a contractor and later being found to have an employment relationship means back-charged labor/health insurance and pension, so judge carefully; ask us if unsure.