Global HR Glossary

What is a Statutory Employee? 

A statutory employee is a worker who occupies a middle ground between a traditional employee and an independent contractor. This classification allows for unique tax handling where the worker, while performing services independently, is treated as an employee for tax withholding purposes.

Characteristics of a Statutory Employee

• Employment Status: They are independent in their operations but are considered employees when it comes to federal tax obligations.

• Tax Treatment: Employers withhold Social Security and Medicare taxes but not federal or state income tax.

• Eligibility: Includes specific occupations such as certain types of salespeople, delivery drivers, and home workers.

Benefits and Considerations

• Benefits: Allows for simplified tax processing and benefit eligibility like an employee.
• Considerations: These workers must manage their income reporting differently, often using Schedule C for tax purposes.