As the federal government and state agencies crackdown on businesses that misclassify employees as independent contractors, it is increasingly important that companies correctly classify their workers. But there is no standard regulation for what constitutes a legal independent contractor. This series will examine the different tests and guidance used by the multiple federal and state agencies to determine if workers can be considered independent contractors.
The take-away point of this series is that it is very hard to correctly classify a worker as an independent contractor. State and federal agencies tend to look at the degree of control a company has over a worker and how financial dependent the worker is on the company when determining a worker’s correct classification. But there are a number of different ways those agencies go about evaluating those factors.
In order to safely classify a worker as an independent contractor, a company must ensure that the individual qualifies as such with each and every government agency that could be involved. A simpler, safer way to go would be to utilize workers on a contract basis and then outsource the employment of those workers to a contracting back-office.
In this scenario, the contractor wil be paid as a W-2 employee of the contracting back-office. Therefore the proper payroll taxes are paid and workers’ compensation and unemployment are provided to the worker. But the company still can enjoy the flexibility of utilizing workers on a contract basis, which allows them to quickly bring in help when needed and then end the contracts when the need passes. Companies also avoid the cost and liability that comes with hiring employees direct because those responsibilities are passed to the contracting back-office.
In short, contract staffing through a contracting back-office offers the best of both worlds – the flexibility and cost savings that come with contract workers without the unnecessary risk!
This article is for informational purposes only and should not be considered legal advice.