Which statement best distinguishes an employee from an independent contractor?

• A. Employees are typically self-employed
• B. Independent contractors are employed by an organization
• C. Employees work under direct supervision and may receive benefits; independent contractors are self-employed and provide services under contract
• D. Independent contractors must always work for a single client

Answer: (C)

The key idea being tested is how worker status is determined by control and the nature of the relationship with the organization. The best statement captures the practical difference: employees are under direct supervision and may receive benefits, while independent contractors are self-employed and provide services under contract.

This distinction matters because employees are generally integrated into the organization’s operations, with the employer directing how, when, and where work is done and often providing benefits as part of the compensation package. Independent contractors, by contrast, run their own business, control their own work methods, supply their own tools, invoice for their services, bear their own business risks, and typically do not receive company benefits.

The other statements misrepresent the nature of the relationship. Employees are not typically self-employed; that description fits independent contractors. An independent contractor is not “employed by” the organization in the traditional sense, but rather engaged under a contract for services. And independent contractors do not must always work for a single client; they can and often do have multiple clients.