which begs the question, if your company is so small that you can't offer health insurance, 401(k), etc then what is the point of having your employees salaried.
You might as well have them as contractors so they can enjoy the maximum tax write offs (health insurance, %age of their home as office, all hardware and software, %age of electricity, internet, etc).
It's not like you can just pick what to call them. An employee is an employee and a contractor is a contractor. If you want someone to work in your office 9-5 and commit their code changes to your server each day, they're an employee, and you can't call them a contractor.
EDIT: What's with the downvotes? Companies do call them a contractor. It happens every day. They're are special concerns but they can certainly work 9-5, etc.
The IRS has cracked down on this practice. You can't just call someone a contractor that meets the conditions to be an employee. You can be mindful of these conditions and work around them but just calling an employee a contractor is not good enough. Even intentionally working around the IRS rules can get you in trouble.
You might get away with it but if you want to make the IRS happy, you better not call an employee a contractor if you don't want to deal with the fines, reclassification and back taxes that go with it.
If you tell someone to come in to your office 9-5 and tell them how to do the work, they're an employee. If you call them a contractor, and the IRS audits you and talks to that person, they're going to fine you for all the unpaid payroll taxes you'll owe. These are words with specific definitions in the tax code.
You are basically right. There are companies specifically set up to allow employers to hire contractors but treat them as employees. Search for "Employer of Portable Record"
You might as well have them as contractors so they can enjoy the maximum tax write offs (health insurance, %age of their home as office, all hardware and software, %age of electricity, internet, etc).