When is an Employee Not An Employee? by Mary T. Nicholson As all employers know, if the worker is an employee, the employer must withhold from the employee's wages amounts for Social Security (the Federal Insurance Contributions Act, or FICA), and federal and state income taxes. In addition, the employer is subject to a tax under the Federal Unemployment Tax Act The question of whether to classify a worker as an independent contractor or an employee is one that many employers wrestle with. There are several factors the employer must consider when making this decision. (FUTA) on the wages it pays to its employees. If the worker is an independent contractor the employer can pay a lump sum to the worker and leave