Categories of Work: Captive Consultants and Contractors
The term Captive Employee is industry slang for employees working on a 1040 tax status. Permanent, full-time employees of company, they may perform services for a number of client companies. The contract with the client is between the client company and the employer of the captive employee — generally a consulting or contracting firm.
The employee is generally paid a salary, whether or not that employee is actually performing work for a client company. Usually these positions involve compensation that includes a benefits package such as medical, dental, etc. When they are performing work for a client company they are sometimes compensated for overtime.
Contracting
Contract Employee
A contract employee generally works on a "contract" that an agent (job shop or booking agent) has with a client company. The agent (we'll call these job shops) holds the contract with the client to provide labor or consulting services. You may have a contract with the agent to provide these services for client companies.
You are a temporary employee (or contract employee) of the agent. The agent pays your taxes, provides (at least) Worker's Compensation insurance, and witholds taxes from your wages.
With any luck, the agent will also provide some form of health insurance and other benefits. You may will be expected to pay for these benefits, which are provided at a group discount.
Independent Contractor
Independent contractors work independent of an agent (or job shop), and hold their own contract with the client company. The contract should define the work to be provided or performed, compensation for the work, and the rules by which the compensation will be granted.
Additionally, you may find clauses about providing notice if you are moving on, or guaranteeing the work. You may also be required to provide proof of various types of insurance, and DBA's (Doing Business As) or articles of incorporation to prove that you are indeed a business and not a contract employee of the client.
The IRS has some fairly strict guidelines that govern how an independent contractor may do business, and the penalties can be daunting. This is why so many clients (in recent years, at least) prefer to go through an agent.
You can protect yourself and your business by knowing what the rules are and how they apply to your situation.
Note: Know what the IRS says about Independent Contractors vs. Employees!
For more infomration about this check out the IRS Web site.
Captive Contractor
A captive contractor is an employee of a job shop or consulting firm, who acts as a contractor on projects for various clients. In this case, the employer will provide additional benefits such as paid holidays, sick leave and vacation time.
They should also pay you for hours (over 40) that are billed to a client.
Consulting
Usually a consultant is someone who is brought in for a limited time to solve one or more specific problems — often they are brought into a client company to train or assist existing staff. Often these consultants are people with advanced or specialized skills that are needed for a time. Many client companies find the cost of maintaining this skill level prohibitive, and bring in a consultant on an "as-needed" basis.
Independent Consulting
One who sells their skills to clients independent of a broker or a consulting firm is an independent consultant . Independent consultants charge the client directly, handle their own taxes and benefits (including additional training). They are often entrepreneurs.
In–House Consulting
Many times large companies will have consultants on staff. These are individuals with some specialized skill that is shared between multiple areas of the company. For example, a large telephone company handling database publishing may have a database consultant on staff, while another company may have one or more an online help consultants.
Consulting Firm Consultant
Consulting firms, especially large ones, such as Anderson Consulting or EDS, have consultants with specialized skills that can be shared among multiple projects of the firm. These jobs often require substantial travel.