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Heidi McLean

portable benefits payreel

If your benefits went with you, how far would you go?

If your benefits went with you, how far would you go? 4000 4000 Heidi McLean

The idea of a safety net takes its inspiration from a circus act. The net allows performers to leap from one bar to the next knowing that if they fall, they will be caught by the net instead of falling directly to the earth. On top of a regular paycheck, traditional employment comes with a safety net. Workers at traditional jobs have access to a variety of benefits, including some or all of the following: short-term disability insurance, health insurance, tax-advantaged retirement plans, training and development, advanced education support, workers’ compensation, paid vacation time, and sick pay. There are some real perks!

The idea of a portable benefits system is to provide a form of safety net to non-traditional workers (think contractors, freelancers, and on-demand workers) who do not have access to the same benefits aside from what they buy themselves. The premise is that the security of a fallback plan at its best allows for innovation, flexibility, and freedom. In theory, that in turn creates more entrepreneurs, more jobs, and more spending power. According to the Aspen Institute, a portable benefits system “would improve financial security and empower workers to take more control over their own economic future.”

Who pays for portable benefits?

Okay, so who’s going to buy and build this safety net? This, of course, is one of the foundational questions. Proposals vary, but in one option, workers, the government, and companies all contribute to a portable benefits account. The fund then covers medical insurance, workers’ pension, training and development, paid leave, and employment insurance. Such a system requires heavy government involvement, which has its critics. Another option would be for companies to contribute to a pool of money for non-traditional workers. That money would then be distributed to the workers through intermediaries or by the employers directly.

While some say both workers and employers can benefit, it could be a tough pill to swallow for employers, who may have to pay more, pass on costs to consumers, or limit the number of contractors they take on.

What’s ahead?

There are a lot of dogs in this fight. Uber (which has come under fire for their handling of employee classification) has provided what it calls guiding principles for a system and asked for a collaborative effort from lawmakers. For their part, lawmakers in Washington, California, New Jersey, New York and beyond have made proposals to address the subject. Even our neighbors to the north are wrestling with the options.

All this points to the fact that this subject is very much on the radar. All parties will continue searching for answers. Employers and the government will wonder who should pay for/administer such benefits and what level of involvement (if any) the government should have. No matter where the evolution takes us, it’s a hot topic and it pays to pay attention. And one question might be on workers’ minds above others: If benefits follow them, how far might they go?

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

workers' compensation

Four ways to mitigate workers’ compensation risk

Four ways to mitigate workers’ compensation risk 5184 3456 Heidi McLean

Who needs workers’ compensation? Anyone with employees, it turns out. Workers’ compensation provides wage replacement and medical benefits to employees injured in the course of employment. Just like any other insurance, it’s one you hope you’ll never need. Still, if you do need it, you’ll be so glad you have it. Employers that ensure worker safety and implement best practices before they need them are in the best position to protect employees, keep claims manageable, and maybe even keep premiums down.

Four ways to mitigate workers’ compensation risk

Prevent the need for claims:

Chase prevention like you would chase the crisis or you’ll certainly end up chasing a crisis. Make regular safety meetings, ongoing education, and performance metrics standard procedure. If you don’t have the budget to implement every possible safety measure, you don’t have the budget for the project. The best workers’ comp claim is the one that never happens.

Implement and/or refine your claims management process:

Instead of scrambling to figure out how you’ll handle a claim if it comes up, take steps ahead of time. Make sure that reserves are accurate. Have a standard operating procedure. Decide who will talk to the adjuster and within what time frame. Taking the time to lay out your processes while your brain isn’t in crisis mode means sounder decisions. The added benefit is that it will reassure your adjuster that you’re engaged and motivated to reach a speedy resolution.

Implement a return to work program:

Have a plan for injured workers who have been cleared for modified duty. These measures reassure insurance companies while demonstrating professionalism to employees.

Invest in accurate worker classification:

An independent contractor filing a workers’ comp claim can easily land a well-intentioned company on IRS and DOL radar screens. This happens with surprising frequency despite the logical assumption that an independent contractor should understand the implications of a business-to-business relationship. One key aspect of a true B2B relationship is that a worker’s business activity exists independent of the employer. Preventing misclassification and communicating clearly with workers is a worthwhile preventative investment.

What’s ahead

Analysts anticipate changes for the workers’ compensation industry ahead. They expect “value-based care, political party changes in several states, and a more holistic view of patient injuries” to affect coverage in 2019. Workers’ compensation carriers may face declining profits and escalating claims costs and operating expenses. Companies that address the subject proactively will be in the best position to ensure minimal premium increases. Aside from cost, keeping employees safe is forever a worthwhile investment.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

gig economy

The biggest myth about the gig economy just got busted

The biggest myth about the gig economy just got busted 4000 2764 Heidi McLean

The internet and all its digital descendents (apps, mobile workspaces, etc.) have made it logistically easier than ever to both be and to hire a creative, freelancer, and side hustler. That much is true. Beyond that, there are a whole bunch of splashy headlines and semi-educated guesses about the gig economy’s reach and impact.

Due in part to two Ivy league economists’ predictions, 2015’s descriptions of the gig economy conjured images of companies dismantling their corporate offices while employees flee to the beaches with their sunscreen and laptops. Now, the question is up for debate again. Is the gig economy the wave of the future? Did it ever happen at all?

Either way, it’s time to revisit one of the biggest misconceptions about the gig economy.

The biggest myth about the gig economy just got busted by the same economists who predicted it

Myth: The gig economy is taking over the world!!!  

The 2015 study that launched a thousand predictions said that from 2005 to 2015, the proportion of American workers engaged in “alternative work” jumped from 10.7% to 15.8%accounting for nearly all of the job growth during that period. This led many to believe the gig economy would supplant the traditional workforce in grand, irreversible ways. As always though, the truth tends to be a little more complicated than surface numbers can tell us.

Estimates indicate that the contingent workforce makes up somewhere between 10.1% and 35% of the economy. It’s none other than the Bureau of Labor Statistics that reported the higher number in 2017saying 55 million people were gig workers. They went so far as to project the number would increase to around 43% by 2020. That seems like a whole lot, but one important note is that its estimates include everyone from the freelance writer with steady retainer contracts to the weekend Uber driver supplementing her income with an occasional shift. As is always the case with estimates, every differencefrom definitions to the source of informationinfluences the results and leads to large gaps in the findings. 

One common cause for confusion is the fact that contingent workforce and gig economy are often used interchangeably. In reality, the contingent workforce pie consists of many different types of work arrangements (only one of which truly constitutes the gig economy). The first two slices of pie include staffing arrangements and independent contractor projects that are defined by an SOW and milestone based contracts. True gig workers make up the third piece and include those in micro-burst jobs and hourly gigs. They typically find work and get paid through a platform (such as Uber).

Additionally, the same economists who wrote that influential 2015 study now say it was flawedbased on inaccurate data inflated by the recession. This article indicates that, with the benefit of hindsight, the labor economists who wrote the study have revised their findings. Rather than accounting for nearly all of the job growth between 2005 and 2015, they say the gig economy grew modestlymore like one or 2 points.

Rather than an “explosion,” the gig economy seems to be in the decidedly less sexy category of a steady progression.

What we know

Things are changing just like they always do. For workers looking to freelance as a career or thinking of it as a stepping stone to a dream job, it’s never been easier to take the leap. We’ll be keeping an eye on how things continue to shift, including how legislation such as the Dynamex Ruling changes the way we do business.

Whether the predictions that led to a hyped narrative around the gig economy were entirely accurate or not, the government is still paying extra close attention to accurate worker classification. No matter where this evolution leads, it behooves employers to stay on top of accurate worker classification. The consequences of misclassification don’t change with the headlines.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

Our most popular posts of 2019 — to help you make the most of your new year

Our most popular posts of 2019 — to help you make the most of your new year 5184 3456 Heidi McLean
As we find ourselves squarely into first week of the new year, let’s not forget about some of 2018’s most popular posts. We covered everything from how to eat like an adult human (even when you’re working like a dog) to the ever-present discussions around worker classification. Dynamex Decision, anyone?

Here are 5 of 2018’s most popular posts

When an independent contractor becomes an employee: A chain of events

Pumpkin spiced lattes! Babies! Generation Z (move over, Millennials)! What do they all have in common? They’re a constant reminder that there’s nothing so constant as change. With its ever-narrowing definition of an independent contractor, California is embarking on the real-time evolution of the gig economy. Here’s the chain of events a company and its workers might go through in response to such changes. Read more.

3 common freelancing myths, plus the truth (can you handle it?)

To overworked, underappreciated 9-5ers, freelancing may seem like the holy grail. But going out on your own isn’t just a world of free-flowing creative juices, coffee breaks, and wads of money. Freelancing can make you feel just as burnt out and unstimulated as whatever made you take a hike from your previous gig in the first place.

Here are 3 common freelancing myths–plus ways to make the road less traveled work for you. Read more.

Who’s FICA? Why’s he getting all my money?

Today, we’re going to dive into the light, easy, totally uncontroversial world of taxes. As in, “Who’s FICA? Why’s he getting all my money?”

About once a week, the PayReel office phone rings with someone on the other end of the line referring to the Federal Insurance Contributions Act (FICA) with exactly the same tone you’d expect with a four letter word. We understand. Read more.

5 skills that will make any freelancer ultra-hirable and profitable

Freelancing is a balls to the wall, pride-swallowing siege and these days, it seems everyone is fighting it out for business. How do you make that business yours? One way is to solve the problems clients have (the ones they called you about) and then go even further by solving the ones they haven’t even thought about yet. That’s when you become an advisor clients can’t live without rather than a freelancer they can replace tomorrow.

Every freelancer should seek to be as hirable and desirable as possible in today’s competitive marketplace. Here are 5 of the most coveted skills as well as where you can hone them for free/next to free. Read more.

How have “work relationships” changed as offices become obsolete?

Gone are the days when “work relationships” are made up of people we see on a regular basis. We can literally have an entire functioning relationship without ever seeing a person or even hearing their voice. Talk about an evolution from the days when sharing an office building was a prerequisite. Here are some of the biggest ways work relationships have changed with the evolving workplace. Read more.

Onward!

With rulings like the Dynamex decision changing the way businesses operate and the digital workspace becoming more common, we are in the middle of one of the biggest evolutions in the modern economy. We will be keeping an eye on the quickly-evolving business dynamics of the 21st century. The one thing we can always be sure of is that change is around every corner.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

open enrollment

Open enrollment is over: What’s a freelancer to do?

Open enrollment is over: What’s a freelancer to do? 490 261 Heidi McLean

If you missed open enrollment–either because you didn’t like your plan choices or because you wanted to take a nap every time you started the application–don’t fret. You still have options. Even if you are enrolled but aren’t happy with your coverage, you may find a solution in one of the less common approaches (read until the end!), which seek to provide an answer for many of the common gripes above.

Common gripes

Getting coverage–particularly for the untraditionally employed among us–can be a real downer. That’s because (a) it can be costly; (b) in-network providers can be inconvenient or ill-suited to your needs; (c) knowing what you qualify for isn’t always black and white.

What are my options?

Going uninsured: The big game changer of 2019 is that the federal mandate (which penalized people without health coverage) no longer applies, meaning you will not be charged for being uninsured in 2019. Young, healthy people who don’t have insurance through work may find this option appealing. Still, going uninsured is a big risk (as in–it could bankrupt you–no matter how little bank you have to rupt). It only takes one unexpected accident or illness to make a seemingly inexpensive choice a very expensive one indeed.

Special ACA enrollment/other state-funded options: If you lose coverage, move, get married, get pregnant, or have a change in income, you may qualify for a special enrollment period for the ACA. Just go to Healthcare.gov and select “See if I can enroll.”  If you qualify, you can also apply for Medicaid or the Children’s Health Insurance Program (CHIP) at any point.

Unregulated insurance: Some insurance options are not regulated by the Affordable Care Act, and therefore allow year-round enrollment. You may wish to look into private market insurers or short-term coverage. As always, read the fine print and do your research before deciding these less-common plans are right for you. 

Concierge medicine: For a monthly fee, you can essentially have unlimited access to Direct Primary Care (DPC) for all your regular needs. This is not the high-cost concierge medicine of olde. Instead, a monthly fee (sometimes as low as $50) gives you quick access to a doctor on call who, due to a smaller patient base, is highly familiar with your particular situation. Here’s an in-depth Consumer Reports rundown on the pros and cons of this approach. For those already paying insurance for a traditional approach, a DPC means an additional cost. For those foregoing traditional insurance (read on), this option gives access to higher quality care (at least in theory) while also offering cost savings.

Health cost sharing ministries: One of the first things they’ll be sure you know is that this decidedly NOT insurance and should not be thought of as such. However, some people find cost-sharing ministries a good alternative or supplement to traditional insurance. Even with subsidies, some only qualify for plans with high monthly premiums and/or deductibles, which means this option offers cost savings in many such cases. The fact that it allows you to choose your care providers based on factors that are important to you (such as healthcare philosophy, convenient location, specialization in your particular needs, etc.) also makes it highly appealing. The way these ministries operate varies, but the basic premise is that members pool monthly payments to share when someone has a medical need. While qualifying expenses are shared, members are technically self-pay and can therefore go anywhere that is accepting new patients. Here’s a Consumer Reports rundown on this approach.

Other cost-sharing services: While the well known cost-sharing options are considered ministries and therefore require some sort of statement of faith, at least one company is offering health cost sharing without any religious affiliation required. Being in the early stages (first memberships start in Jan., 2019) means information and testimonials are limited, but KNEW Health targets health-minded individuals and considers itself a “safety-net for large, unexpected medical costs.”

Combination of the above: Some find a combination of concierge medicine and some sort of catastrophic or health-sharing plan gives them access to the regular care they want while still maintaining peace of mind that they will not be buried in costs for accidents and unexpected illnesses. Here is some info from two people who use a combination of concierge medicine and health sharing ministries to get the care they want and save money, too. They talk about the costs, benefits in their unique situation, and their experience getting costs reimbursed.

The bottom line

You should always do your own research on big decisions–and healthcare is one of the biggest. What options work for you? Why? Once you’ve knocked this one off your to-do list, you will have earned that nap.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

Who's FICA

Who’s FICA? Why’s he getting all my money?

Who’s FICA? Why’s he getting all my money? 245 245 Heidi McLean

Today, we’re going to dive into the light, easy, totally uncontroversial world of taxes. As in, “Who’s FICA? Why’s he getting all my money?”

About once a week, the PayReel office phone rings with someone on the other end of the line referring to the Federal Insurance Contributions Act (FICA) with exactly the same tone you’d expect with a four letter word. We understand. You’re the one who blearily rolled yourself out of your still-warm covers instead of pressing snooze again. You’re the one who (resentfully) learned how to use a crock pot so you’d have a meal (sort of) after your 12-hour workday. You work hard for your money. Why does someone else get to take a big chunk of it while you budget and count pennies for that one sofa that will finally show you’re crushing this adulting thing?

To ease the pain, we’ll start with what FICA is designed to do for you rather than why it gets taken from you. Fair enough?  

What FICA means to your future

The idea of taxes is that we get something in return for paying into the system. Tax money goes into funding for programs, infrastructure, roads, etc. It’s not a perfect system, sure, but that’s the idea.

FICA taxes specifically are designed to pay for medicare and social security. That means that when you reach 65, you can start drawing social security checks and have your health costs covered by medicare. For those without a 401K or another retirement fund, this is the one thing that makes it possible for them to retire. Even people with other sources of retirement often find the social security a necessary supplement.

What FICA is and how it works

FICA taxes are required by the federal government. Employees and employers share the financial obligation. The employer deducts the employee’s share (half of the total due) from employee wages and the employer pays the other half itself. The amount comes out of your paycheck before any other deductions, such as health insurance. The social security tax rate is 6.2% on your gross income. This is standard across the board until you hit a higher tax bracket, at which point, you contribute more. The amount you can draw from social security directly correlates with how much you put in. So if you put more in, you get more out.

The medicare portion is 1.45% and also works on a sliding scale for those who make 200K+. This is a federal health insurance program you can start drawing on when you’re 65.

What FICA isn’t

This has nothing to do with your W-4s.  W-4s have to do with federal income taxes. The way you fill out your W-4 tells your employer the correct amount of said taxes to withhold from your paycheck, based on your filing status and income bracket. The IRS recommends filling out a new W-4 any time your personal or financial situation changes.  FICA, on the other hand, has to do with your social security and Medicare and there is no such form for FICA because you cannot claim exemption.

The bottom line

When everything works as it’s designed to, FICA is not the bad guy. It is an important part of each generation’s future.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure everyone gets paid quickly and easily, and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

The paid sick leave debate rages on: Here’s what you need to know

The paid sick leave debate rages on: Here’s what you need to know 3000 2000 Heidi McLean

The U.S. ranks among the 13% of countries who do not mandate paid sick leave despite the fact that Americans work longer hours and have more stress-related illnesses than their European and Japanese counterparts. While the Family and Medical Leave Act (FMLA) does prohibit penalties for people who take time off to care for a sick/new family member, it doesn’t guarantee the time will be paid. With cities passing their own paid sick leave ordinances while states push back and states passing laws despite the federal position, the debate rages on.

What do proponents of paid sick leave say?

1. Employees with paid sick leave take better care of their health

Financial concerns loom for those without paid sick leave, but when workers have paid leave they are more likely to get annual physicals and take preventative measures such as flu shots and mammograms. In short, workers with more paid sick leave are more likely to take care of their health.

2. It protects workers

Clearly not having to miss wages due to a bad case of the flu is beneficial for the worker herself, but some say benefits cascade from there. The workers left in the office stay healthier too because people aren’t as likely to bring their germs into work to share more liberally than holiday fruit baskets.

3. It’s good for employers

It may seem counterintuitive, but some estimates say one of the biggest beneficiaries of mandatory paid sick leave is employers themselves. That’s because offering a solid paid sick leave policy may actually lead to fewer absences and higher productivity. When workers take the time to recover, they can also get back in the game quicker and be more effective. They also argue that people with space to care for their physical and mental health are better employees. Some argue that if workers had more sick leave days, they wouldn’t be quite as likely to come to work sick in order to protect those coveted vacation days.

4. Mental health is an important consideration, too

Eliminating mental health stigma and allowing mental health days into the equation may make people less likely to lie about why they’re taking a day off. An employee on the verge of burnout could simply say, “If I don’t get a little distance from things in the office, I’m not going to be able to do my best work. This job is important to me and the team deserves my best.” Surely that’s preferable to an oddly specific description of their employee’s digestive issues and better for team morale and productivity, too.

What do opponents of paid sick leave say?

1. People abuse it

They’re sick all right…sick of working. Employees misuse paid sick leave with little remorse, using it to go to the Renaissance Fair or on a vacation. Such abuse, which Oregon describes as “repeated use of unscheduled sick time on or adjacent to weekends, holidays, vacation, or pay day, regardless of the number of consecutive days,” may be rampant. Judging by these related searches that came up when I googled “fake sick days,” this is an entirely legitimate concern. Some people approach their excuses with the discipline of a competitive sport.

 

2. It violates business rights and economic success

It should be up to companies to decide how to take care of their employees. Not only is it unfair and debatably illegal to require companies to provide paid sick leave, it can be damaging to businesses, which are at the heart of a state’s economic success. Tracking sick leave is an expensive, complex process. That cost may also get passed on in the form of more expensive goods or services. A better alternative Lisa Horn, director of congressional affairs for the Society for Human Resource Management, says, is a pre-emption bill. The idea is to set a minimum to the voluntary amount of paid sick leave employers could offer. When met, companies would be exempt from local or state mandates. Horn argues that this would eliminate some of the administrative headaches and lessen the burden of such mandates, which vary from state to state and city to city.

3. Benefits don’t translate to all workers

Paid sick leave rules were designed for a conventional FTE workforce and do not translate in the same way for workers who are temporary and who work at varying worksites. It accrues slowly and must be used in the same area (same zip code in some instances). This makes it very tricky to determine when and where the sick leave is valid.  Say a worker accrues one hour after 30 hours of work. They are unlikely to turn down a $700 day gig for one hour of accrued sick pay. Paid sick leave mandates provide little benefit to temporary workers, but still require expensive, complex tracking. As is often the case with such mandates, it can backfire when applied to the flexible, freelance workforce.

The bottom line

According to this article, the “tortured” history of paid leave in the U.S. indicates that abundant paid leave of any kind seems a bit countercultural for a country famous for its hard-working ways. As it stands, the fury continues, with Texas duking it out as we speak.

 

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure you get everyone gets paid quick and easy, and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

When an independent contractor becomes an employee: A chain of events

When an independent contractor becomes an employee: A chain of events 450 450 Heidi McLean

Pumpkin spiced lattes! Babies! Generation Z (move over, Millennials)! What do they all have in common? They’re a constant reminder that there’s nothing so constant as change. With its ever-narrowing definition of an independent contractor, California is embarking on the real-time evolution of the gig economy. Here’s the chain of events a company and its workers might go through in response to such changes.

When the definition of an independent contractor narrows:

1. Companies reclassify employees… or not

When an independent contractor becomes an employee, her pay structure changes. Even if all the goodies afforded an employee (healthcare, time off, etc.) bring them close to their original pay in practice, their paycheck may look a lot smaller. That’s because it costs a lot more up front to have an employee and employers withhold taxes. While ICs are still responsible for paying taxes, they can also take advantage of many write-offs, which go out the window once they’re employees. Some employers like this structure, feeling it gives workers more ownership in the company’s success. Others say the structure makes their business model unsustainable.

In the latter case, they may restructure the job completely to avoid hiring more employees. Because often new laws precipitate more ways to get around those laws. Another way to avoid reclassifying is to simply operate business as usual and wait to be challenged. Especially in the case of smaller companies, history shows this could take years or not happen at all. Workers might not know or care about the changes. They may opt not to push out of fear or they may not be able to join together to get strong enough influence. This is a risky approach, but not unheard of.

2. Workers quit or stay

Once employers make their choice, employees make their own. If companies do decide to reclassify workers as employees, they then decide if the situation works for them. If not, they often quit (as we discussed in our last post). Some stay, preferring the stability that comes with being an employee.  Some may even get promoted under the new arrangement, as this article talks about in the case of Matthew Johnson, who’d been driving for several companies before becoming an employee at Perennial. With a greater presence at the office and familiarity with the ins and outs of his company, Johnson was able to make helpful suggestions that earned him new responsibilities and a promotion.

Many employers and workers alike viewed the previous arrangement as a symbiotic relationship that worked well for both the business owners and the workers they employed. So if their bottom line becomes unacceptable, workers may tap out and either increase work for their other clients or look for different work altogether.

3. Everything changes

No matter what happens, everything will change. This latest evolution in the economy will be replaced with another, which will upend the last. And so it goes. Again and again and again.  Tell it to the Gen Zer who has never burned a CD before. She still thinks she’s going to be young forever.

 

Note: Can’t get enough? We’ve covered misclassification in depth. See more here.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure you get everyone gets paid quick and easy, and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

worker classification and small businesses

Worker classification and small businesses: Is the ABC rule the beginning of the end?

Worker classification and small businesses: Is the ABC rule the beginning of the end? 4858 3239 Heidi McLean

California—home of eternal sunshine and landmark lawsuits. One of the state’s most recent rulings, in the Dynamex Operations West Inc. v. The Superior Court of Los Angeles County case, resulted in some changes to the ABC test for worker classification. While the test has existed in some form for decades, this iteration eliminates some of the gray area in deciding whether a worker is an employee or not. It’s the narrowest definition of an independent contractor to date.

This ruling has already caused major changes in the Golden State and, if history is any indicator, may have a cascading effect for the rest of us. We hear a lot about worker classification and the big dogs—the Ubers and the FedExes of the world. Today, we’re looking into what it means for the mom and pop shops and the workers they employ.

What is the ABC test for worker classification?

In California, a worker can now be considered an independent contractor only if all of the following apply:

A: the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

B: the worker performs work that is outside the usual course of the hiring entity’s business; and

C: the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Okay, so what’s at stake?

According to the court’s ruling, “the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue.” Read: money. For the government, tax dollars are a big part of the equation. Small businesses can avoid certain taxes with fewer employees and independent contractors can write off business expenses and may also underreport their income. Hence the resulting “deprivation.”

And for small businesses such as salons? Well it’s the B of the ABCs that’s upsetting the mom and pop apple cart because their workers perform work that is decidedly within “the usual course of the hiring entity’s business.” According to the business owner in this article, the previous model allows them to keep their doors open. They say they can’t afford to pay their workers as employees and provide the benefits required by law. So with the switch, many of this business owner’s workers quit overnight. Many employers and workers alike viewed the previous arrangement as a symbiotic relationship that worked well for both the business owners and the workers they employed.

This website, for cosmetologists, describes the benefits independent contractors have in the “booth rental” model. Like any independent contractor, they set their own schedule and manage their own business. They also keep any earnings beyond their booth rental fee. That means the harder they work and the more loyal clients they secure, the more they earn. As part of the salon, they get the benefit of the establishment’s marketing as well as possible walk-in clients. On the flip side, they also have the not-so-sexy responsibilities that come with owning their own business. They run their own books, pay quarterly taxes, advertise to get their chair filled, purchase their own equipment, and deal with the seasonal nature of the biz. Independent contractors also don’t get paid time off and are responsible for purchasing their own health insurance.

What about the workers?

Okay, so what’s a hairstylist to do? Well the rule purportedly intends at least in part to protect them and provide “the labor law protections to which they are entitled.” But some are concerned about what the change means for their livelihood. If you spend a little time reading threads dedicated to salon workers and truckers, who often work as independent contractors, you’ll find discussions among people trying to figure out how to navigate this new landscape.

They may choose to accept the lower pay along with the guarantees and security that come with being an employee. That is, if traditional salons operating under the booth rental model decide to stay open. Or they can set up their own truly independent businesses, perhaps operating out of their homes and skipping the salon altogether. This will work better for those with an existing loyal client base. For those just entering the field, it remains to be seen.

Bottom line

If you’re outside of California, don’t think this doesn’t directly affect you. Other states are already starting to use the ABC test too (i.e. Illinois, New Jersey, Maine and Massachusetts). And this isn’t just about salons. Many other operations, from physical therapists to those delivering packages to your door, are affected by this change. Often, in cases like these, one landmark case paves the way for others to follow—begrudgingly though the case may be. So even if you don’t personally feel the effect of the changes, you probably will before long. And what about your haircuts? Are you ready to go to your stylist’s home? Soon, it may be one of your only choices for the services you know and love.

 

Note: Can’t get enough? We’ve covered misclassification in depth. See more here.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure you get everyone gets paid quick and easy, and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes live event, corporate media, and brand management payroll easier, faster, and seamless.

payroll fraud

Worried about payroll fraud? Here’s how to prevent and detect it.

Worried about payroll fraud? Here’s how to prevent and detect it. 5616 3744 Heidi McLean

The ragtag group of employees who set out to redirect “fractions of pennies” to themselves in the movie Office Space didn’t think of it as stealing. They’re even portrayed as the heroes in the movie—sticking it to the man and finding themselves in the process. Likewise, payroll fraud is so common in the real world that many don’t even think of it as fraud. They’re not thieves! They’re just “redirecting” funds they feel should be theirs anyway. This mindset, along with how easy payroll fraud sometimes is to pull off, makes for a dangerous combination. Businesses with small payroll departments are most vulnerable, but it happens at the big companies and even feel-good nonprofits, too. We’ve collected a tool kit of tips and resources to help you prevent and detect payroll fraud.

What exactly is payroll fraud and why should I care?

Payroll fraud is a misappropriation of funds commonly in the form of paying “ghost” employees or vendors and various types of falsifying wages/hours. The Association of Certified Fraud Examiners (ACFE)’s biannual 2018 Global Study on Occupational Fraud and Abuse covers some of the impact of such fraud. Among its key findings are:

  • Businesses lost over $7 billion among reported cases
  • Small businesses lost more than twice as much per scheme
  • Fraud schemes’ median duration was 16 months

Okay, so how can I prevent it?

As usual, the best approach for protecting yourself is preventing problems in the first place. Preventive measures discourage a would-be fraudster from trying in the first place while also making frauds more likely to be caught early on. Any cost or perceived hassle of preventative measures pales in comparison to the potential cost of lax procedures.

  1. Start at the beginning. Use the Social Security Administration website, E-verify or the IRS website to confirm candidates’ identities. Conduct a background check after that. Continue the process at regular intervals even after hiring. Making this level of scrutiny regular practice ensures it doesn’t appear personal toward a particular employee.
  2. Separate duties. When the same person makes entries, writes checks, and audits the books, they have too much power. Having multiple points of control and separation of duties ensures you keep a system of checks and balances (pun intended) in place.
  3. Conduct internal and external audits. According to the ACFE report, internal audits “accounted for 15% of the frauds detected” and external audits caught 4% of the frauds. Quarterly reviews are a reasonable and healthy standard practice for companies of all sizes.

Something seems fishy. Now what?

So let’s say you’ve taken preventive measures to minimize risk and something still doesn’t add up. Even if they have to get more creative and sneaky, some people will try to overcome the obstacles you’ve put in place. So now you have to dig.

  1. Watch for red flags. This aforementioned article—about the ghosts among us—identifies some of the major red flags to watch out for. Hint: an employee who never takes a day off may not be as dedicated as you think.
  2. Provide a hotline for tips. The ACFE report notes that tips are the most common detection method and that organizations with hotlines receive more tips (46%) to potential fraud than those without (30%).
  3. Follow the money. Corrupt behaviors tend to leave a money trail. More than one employee using the same bank account, vendors you’ve never heard of receiving checks, and unusually high expenses are all signs something may be awry. If something seems fishy, investigate or hire someone to do it for you. And do it quietly so you don’t tip off the fraudster(s) before you have all the information you need.

Bottom line

The ACFE provides in-depth fraud prevention checkup that can get you thinking about the topic in a new way, identify vulnerabilities, and help you determine a course of action to put preventive measures in place. Most payroll fraud, while incredibly frustrating and costly, is highly preventable.

 

Note: A third type of payroll fraud is committed by businesses that misclassify employees as independent contractors to avoid paying payroll tax and other costs associated with employees. We’ve covered misclassification in depth (see more here) and focused on the kind perpetrated against a company for today’s post.

About PayReel:

At PayReel, we minimize the time and effort it takes to get you ready for your project. Rely on PayReel to assume all of the risk associated with worker classification and get back to the business at hand. We make sure you get paid quick and easy, and have Client Relationship Managers on call around the clock to answer your questions. All you have to do is call 303-526-4900 or email us. The PayReel team makes event payroll easier, faster, and seamless.