Employee vs. Independent Contractor: What Wellness Entrepreneurs Need to Know

If you run a chiropractic office, physical therapy clinic, fitness studio, or any type of wellness business, one of the most important (and most confusing) decisions you’ll face is whether to classify a worker as an employee or an independent contractor.

This isn’t just a technicality—it’s one of the top areas of IRS scrutiny, and getting it wrong can lead to penalties, back payroll taxes, and interest. Let’s break down the key differences in plain language, with examples that apply directly to wellness businesses.

1. Control and Flexibility

• Employees: You control their schedule, how they perform their work, and you often provide ongoing training.

• Contractors: They choose how, when, and sometimes where the work is done. You have less control.

Example: A front desk assistant at a yoga studio is an employee because you set their hours and train them on software. A guest meditation teacher for a one-time workshop is a contractor since they decide how they deliver their service.

2. Tools and Resources

• Employees: You provide the equipment, supplies, and space. (Software, treatment rooms, gym equipment, etc.)

• Contractors: They bring their own tools and resources.

Example: A massage therapist who brings their own table and supplies to a chiropractor’s office is likely a contractor.

3. Financial Relationship

• Employees: Paid hourly or salaried, eligible for benefits, and have payroll taxes withheld.

• Contractors: Paid per session or project, invoice you directly, and handle their own taxes.

4. Duration of Work

• Employees: Ongoing roles that are integral to your business (front desk staff, in-house trainers, or therapists you supervise regularly).

• Contractors: Hired for short-term, specialized, or one-off work (marketing consultants, guest instructors, or workshop leaders).

5. Reporting Requirements

• Employees: You issue a W-2 and withhold payroll taxes.

• Contractors: You issue a Form 1099-NEC if you pay them $600 or more in a year (rising to $2,000 in 2026). Contractors are still required to report their income, even if it’s under the threshold.

6. IRS Scrutiny Is Real

The IRS uses a “control test” across three areas to determine classification:

• Behavioral Control (do you direct their work?)

• Financial Control (who provides tools and assumes financial risk?)

• Relationship (is the role integral to your business long-term?).

Wellness businesses are frequently flagged for misclassification. For instance, trainers, yoga instructors, and therapists are sometimes labeled as contractors even though they function like employees.

Real-World Wellness Examples

• Chiropractor’s office:

  • Employee → receptionist, in-house billing staff

  • Contractor → massage therapist renting space a few days a week

• Boutique fitness studio or gym:

  • Employee → front desk staff, regular trainers you schedule

  • Contractor → guest instructor for a specialty class

• Physical therapy clinic:

  • Employee → staff physical therapist seeing clients daily

  • Contractor → yoga teacher brought in for rehab classes or a marketing consultant

Final Thoughts

The line between employee and contractor isn’t always black and white. Missteps can be costly, so take the time to evaluate each role carefully. When in doubt, consult with a tax advisor or bookkeeper who understands both IRS rules and the unique needs of wellness businesses.

Getting this right protects your business—and keeps you focused on what you do best: serving your clients.