An independent contractor is a person who exercises independent

employment and contracts to do a piece of work according to his own

judgment and methods, and without being subject to 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.
An employee is the person who works under an employer who controls the
work environment, dictates how tasks should be done, and has specific legal
and financial responsibilities toward the employee. Section 61 of the Labour
Institutions Act stipulates the situations in which the person can be
presumed to be an employee. Read Section 61 (a)-(g) of the Labour
Institutions Act, the provision contains the ingredients of the multiple test.
The difference between an employee and an independent contractor
is that an independent contractor is independent and self-employed and
agrees to offer his/her services to another for a fixed price while an
employee is a person who works for another for a wage or salary also an
independent contractor is not entitled to the rights and benefits that an
employee is entitled to. For example, the statutory protections that apply to
employees such as the rights and remedies under the Employment Act, the
employers’ liabilities for acts committed by employees, work injury damages,
right to join unions, minimum wages, annual leave, paternity/maternity
leave, redundancy payments, statutory remittances such as National Social
Security Fund (NSSF) or National Hospital Insurance Fund (NHIF) and an
independent contractor pays his/her own taxes and is responsible for actions
in tort.
The courts have developed various tests that can be used to determine the
nature of engagement and distinguish between an independent contractor
from an employee which are the following
The Control Test
The control test seeks to answer the question whether there is control being
exercised by the employer over the worker and how much control. Where a
servant is subject to the command of the master as to the manner in which
he or she shall do the work then there is deemed to be control.
The more control that is being exercised, the more likely it is that the worker
is an employee regardless of what the contract says.
The control test seeks to determine who has the right to control the following
basic elements: What must be done; and how it must be done.In the case
of John Wachira Githongo v Soyama Hardware Limited (2017)
(eKLR) the claimant was engaged by the respondent to source and buy for
the respondent hardware materials from Nairobi. The respondent would give
the claimant Kshs.5,000 for transport and related expenses and
Kshs.15,000/- for each completed assignment. The claimant claimed that he
was an employee of the respondent and unlawfully dismissed. In determining
whether the claimant was an employee the court considered the control test
and held that the claimant was an independent contractor as the respondent
did not impose control measures on the claimant about the assignment.
There was no evidence that the respondent identified the suppliers or shops
the claimant bought the goods from and the respondent imposed no rules on
how the claimant would bargain the prices of the goods sold or even delivery
timelines in that regard. Other than the respondent providing the necessary
funds, the respondent subjected the claimant to no commands in the
delivery of the assignment.
The Integration or Organization Test
This test considers the individual’s degree of involvement in the organization
and if the services provided by an individual are integral to the organization,
then their involvement is one of employee. If the services can be viewed as
part of a separate business of the individual who provides the services, the
individual may then be viewed as an independent contractor.
The court in the case of Stanley Mungai Muchai vs National Oil
Corporation of Kenya Cause No.447N of 2009 considered the
integration test and stated that the integration test is where the worker 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, staff of independent contractors
may as well perform entries integral or primarily part of the business when in
fact, they are not employees.
The Economic Reality Test
The economic reality test is a test used by courts for the purpose of
determining if a person is an employee or if the person is in business on his
or her own account as an entrepreneur by considering such things as the
extent of the alleged employer’s ability to control, hire, fire, and discipline
the person, the nature of the person’s duties, and the payment of wages and
who takes the ultimate risk of loss or chance of profit.
Benefits and statutory deductions
the payment for the services will. He is not subject to usual registered
taxpayer, responsible for remitting his own taxes based on Under the
Employment Act, an employer is obligated to make statutory payments for
an employee such as NHIF and NSSF employee. An independent contractor
on the other hand is not entitled payments. The Employer is also required to
remit PAYE for the to payment of such statutory remittances by the
employer. He is a ‘employment’ matters such as the deduction of PAYE and
taking annual leave.
Liability for wrongful acts
business requires an employee or an independent contractor. Each has
periods and only requires one form of qualification or where one weigh each
option by considering the length of the task, the resources qualifications,
then it is only advisable to hire an independent contractor is not liable in
general for the negligence and other wrongful An employer is liable for the
wrongful acts of his employee if the acts Having distinguished the difference
between an employee and an its pros and cons and before choosing either of
them, it is important to available and the type of work. For instance, where
the task will take a contractor. On the other hand, where the work to be done
is for long independent contractor, it is important to determine whether a
short period and requires a number of people with different acts committed
by the contractor. are committed in the course of employment. This is known
as vicarious liability. On the other hand, a person who hires an independent
person can perform multiple tasks, then it is better to hire an employee
Mode of payment
An employee is usually paid at certain intervals determined by the where the
Claimant was paid per each completed job and his payment of payment was
not ordinarily found in an employer/employee independent contractor does
not have to adhere to strict payment employment contract and the
Employment Act.
Mutuality of obligation
It is where the parties make commitments to maintain the employment
relationship over a period of time. The employer has an obligation to provide
continuous flow of work or assignments and pay the employee and the
employee has an obligation to do the work and complete the assignments
assigned to him or her. In the absence of mutual promises for stable future
performance, the worker thereby ceases to be classified as an employee.
Equipment
This test considers who provides the tools of service. An employer will
essentially be required to provide the employee with the tools of service.
However, a contractor will use his or her own tools.
A contract for service/consultancy agreement and contract of
service/employment contract are common law terms that are used to
distinguish between the nature of service provided by a worker to employer.
An independent contractor is engaged through a contract for service. The
contract for service sets out the manner in which the independent contractor
is engaged, the services to be performed and the mode of payment for the
services performed. Whilst an employee is engaged through a contract of
service. The employment contract sets out the rights and obligations of the
employer and the employee in the employment relationship.
Pros and Cons of Being an Independent Contractor
Advantages of Independent Contracting

Flexibility and Autonomy: Contractors possess the liberty to select their

clients and projects, enabling them to navigate their career path based on
their interests, skills, and professional growth objectives.
Control over Income: One of the prime perks of being an independent
contractor is the capacity to determine one's own fees.

Beneficial Tax Deductions: As self-employed professionals, contractors have

the opportunity to claim tax deductions for certain business-related
expenses, reducing their taxable income.

Disadvantages of Independent Contracting

Lack of Employer Benefits: Unlike employees, contractors are not entitled to

benefits such as health insurance or retirement contributions.

Self-Employment Taxes: Independent contractors are fully responsible for

paying their own Social Security and Medicare taxes, known as self-
employment tax.

Job Insecurity: The lack of long-term contracts or commitment from clients

can make the job security of an independent contractor uncertain compared
to traditional employees.

Pros and Cons of Being an Employee

Advantages of Employment

Steady Income and Job Security: Employees have the assurance of regular
income, providing financial stability.

Workplace Protections: Employees have a set of protections and rights under

federal and state employment laws, which cover areas like minimum wage,
overtime pay, and workplace safety.

Disadvantages of Employment

Limited Professional Autonomy: Employees may have restrictions on work

hours and tasks, with employers often dictating the work structure. This can
limit professional autonomy compared to independent contractors.

Reduced Flexibility: Fixed work schedules are a typical aspect of full-time

employment, often resulting in less flexibility than what independent
contractors may enjoy.

Risk of Burnout: With the demands and pressures of a full-time job,

employees can face the risk of burnout. This is a particular concern in high-
stress tech roles and requires proactive management strategies.

Worker Misclassification
Conclusion
An independent contractor is therefore someone who is a registered
taxpayer, runs his own business, determines his own working hours, employs
his own tools and invoices for work done hence 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

Reference
Case law: John Wachira Githongo v Soyama Hardware Limited (2017)
(eKLR)
Stanley Mungai Muchai vs National Oil Corporation of Kenya Cause
No.447N of 2009
Statutes: Labour Institutions Act