Compliance

No matter where you are, engaging independent contractors comes with some risk to your business. You need to be ready to abide by a zillion (give or take) laws and regulations to make sure you stay compliant and in good standing with state and federal rules and regulations. In any of the high-risk states, it’s important to take extra care to protect your business from the associated liability.

Where is it Riskiest to Engage Independent Contractors?

California tops the list of risky states for engaging independent contractors. The laws there are never as simple as they seem at first blush, and the stakes for violations are high. California is considered a bit of a trendsetter in employment laws, so even if you don’t have workers there, the effects can reach your own states. In addition to the Golden State, Connecticut, Washington, Oregon, Indiana, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Washington, and Wisconsin are all considered the riskiest places to engage independent contractors.

What Makes a State High Risk?

Laws around documentation and classification exist everywhere, but wherever they are more complicated, the risk of engaging contractors increases. On top of that, the regulations change often, and, in some cases, they even contradict each other. Yikes. This makes guarding against the major concerns (including audits, classification, and overall compliance) trickier. The good news is that it’s not impossible. Businesses without an internal team/human resources department that is equipped to address those unique needs should partner with a company that specializes in handling them and being proactive about changes as they happen. 

Misclassification/Compliance Concerns

While it’s usually the major lawsuits against uber-sized businesses (like, ahem, Uber), many smaller companies misclassify workers without even realizing it. There is not a standard, universal, objective test to determine whether a worker should be classified as an independent contractor or an employee. In addition, each state has the power to determine some of its own rules. So not only is it complicated, but the stakes for misclassification are quite high. Violations can result in hefty fines, back taxes with interest, and lawsuits.  

Audits

Audits don’t care if your mistake is intentional or innocent and they are incredibly inconvenient either way. Being sloppy about classifying workers or casual about documentation is one of the easiest ways to end up on the government’s radar. Businesses should have an airtight process–from the up-front paperwork all the way through payroll– designed to ensure workers are correctly classified and that they receive the corresponding benefits and accurate pay. 

Now What?

For companies without an internal team equipped to handle the issues, engaging a partner that addresses the concerns related to engaging workers in high-risk states is a slam dunk.

Here at PayReel, classification and compliance matters are at the core of our business. As such, we’re continually improving our system with a defined classification process that takes into account federal, state, and agency rules and includes a checks and balances process to ensure that the chosen classification has a solid precedent. We take compliance seriously on your behalf! Contact us if you want to see if a partner could make your business better or your life easier. 

Ransomware attacks have caused supply chain disruptions, compromised medical care, and even canceled flights. The issue simply isn’t going away. Most of us have added two-step verification to everything from our NestCams to our grocery chain apps and taken increased steps in our own personal security. This is a good start, but businesses that have access to workers’ Personally Identifiable Information (PII) have extra responsibility. A mistake that compromises your own personal data is certainly an inconvenience, but if you fail when you’re handling other people’s data, it can be a crisis.

If you handle other people’s info, you simply must have solid measures in place so those trusting you with their data know they are in good hands. Ideally, they will never have to think about it. If they do, it likely means you’ve already messed up and you might even be in the headlines.

Security is Everything 

Can you think of many business functions in the world that access more priceless personal information and sensitive company information than hiring? The best systems, software, and teams mean little if they are vulnerable to security attacks. You’ll never make headlines for all your measures preventing an attack, but you’ll certainly make headlines the moment your efforts fail.

How Do You Prevent a Security Breach And Stay Out of The News? 

The most secure organizations partner with and employ several internal and third-party resources to protect PPI as fiercely as possible.

At a minimum, we recommend you: 

• Encrypt everything at multiple levels
• Treat all sensitive information as Personally Identifiable Information (PII) and in accordance with HIPAA recommendations
• Keep sensitive data from going offshore
• Have third parties perform monthly security checks and an annual penetration test

What CEO Todd Keener Has to Say About Security

Among other things, Todd talks about how security and privacy needs to baked into company processes, culture, and procedures. While security has always been important, the issue has accelerated greatly in the last five years. Staying in front of the changes requires the company to have the issue front and center and ongoing processes to test their own systems. Third-party systems should be in place to continually adjust and have continual formal improvement baked into everything you do.

Bottom Line

One of the biggest benefits of working with an Employer of Record (EOR) like PayReel is that we’ve already built the infrastructure to follow all of the above recommendations. We protect clients’ resources, contracts, and data at all times with multi-leveled security systems.

Hey, you can let your PR company keep you in the news for good reasons. At PayReel, we specialize in keeping you out of the headlines you don’t want to be saddled with. Bottom line: You better check yourself before you wreck yourself and also have partners in place to help you.

Nichole Rose—our new Risk & Compliance Program Manager—stays ahead of the game to help clients with their compliance practices. She covers Human Resources matters such as benefits, workers’ compensation, and wage and hour compliance. Staying on top of the ins and outs of risk and compliance is hard, time-consuming, high-stakes work. Isn’t it nice to know you have someone in your corner to keep some of the riskiest aspects of your business running smoothly and accurately?

As the oldest of 10 siblings who earned her undergraduate degree in teaching children with special needs, Nichole Rose’s background provided her leadership opportunities and a lot of experience helping others. As such, she is just the kind of person you want in your corner. Nichole Rose also has a wide knowledge of HR topics and a strong desire to do things by the book to keep people out of trouble. She will soon be sitting for PHR (a certification in professional HR) which requires her to do continuing education to stay on top of all the latest changes.

Nichole has served in HR roles for Lowe’s, a fast-food chain, and a manufacturing plant. She enjoys giving clients the information they need to make the best decision for their situation. She certainly doesn’t know everything, but if you have a question, she’s going to help you find out what you need to know.

Outside of work, you’ll find Nichole Rose watching baseball. Her favorite players are the Little Leaguers in her own house, but she enjoys watching the professionals, too. She loves her family (including her two dogs!), camping, fishing and sitting down with a good book.

Let’s start with what an Employer of Record (or an EOR) is.

Here’s what to do today if you think you might benefit from partnering with an EOR

If partnering with a company that specializes in these services and has existing systems in place would help you move your projects forward and keep your hands off those cookies, fill out our form at PayReel.com and we’ll talk through solutions for your unique situation. 

The court battle over which workers can be classified as independent contractors versus employees does affect your business whether you want to think about it or not. Whatever the IRS makes a priority  of a topic will soon be the focus of audits, too. In short: that means anyone with workers must be well-versed on worker classification.

Independent Contractors (ICs) are self-employed, hired to do a specific job, and receive payment only for the work performed. Unlike a regular employee, they pick their jobs and regularly move from client to client, business to business. Also referred to as freelancers, consultants, and 1099’s, they report their own business income and pay self-employment taxes.

Hiring an IC is attractive to companies looking for outside creative resources who want to outsource work that is not central to their main line of business. The work is project-oriented and is typically completed in a short amount of time. It’s also easier on the budget to pay your IC as a vendor, not as an employee.

Sounds nice, right? But there’s a big catch.

The IRS has very strict guidelines that define true business-to-business relationships. These guidelines are meant to prevent firms from misclassifying would-be employees, thereby avoiding a bounty of state and federal taxes.

Is your IC really an independent contractor?

This is a deceptively complex question. It’s important to justify your “yes” because of the high audit risk associated with loose practices around independent contractors.

Best Practices:

• Contractor has an established business entity and EIN
• Contractor provides services to multiple clients
• IC provides certificates of insurance, including general liability insurance and worker’s comp
• Company and contractor have a signed services agreement
• Agreement specifies project length, compensation and liability

When working with your contractors:

• Do not train a contractor, direct their work responsibilities or define their work schedules
• Independent contractors should use their own equipment
• Do not provide any employment benefits, such as health insurance and corporate stock options
• Contract on a per-project basis
• Keep in mind that this is a business-to-business relationship

Prevent an Audit/Years of Headaches

Audits are costly and time-consuming even for businesses that do everything by the book. How much are you willing to pay in time and hassle for employee misclassification? If you have any questions about independent contractor status, trust PayReel to help you make the determination.

We screen each employment situation carefully to assess the entire relationship to make sure you are in complete compliance. Call us at 303.526.4900 or email info@payreel.com.

Keeping on top of the ins and outs of compliance is hard, time-consuming, high-stakes work. It’s worth it to make sure you have an in-house team or a partner dedicated to keeping your payroll services running smoothly and accurately.

Legal Considerations

It’s hard to think of a higher-stakes aspect of business than where the money goes and how it gets there. Your in-house team or partner needs to do the following:

• Mitigate compliance risks
• Be aware of practices that could compromise compliance
• Track benefits eligibility
• Track changes in minimum wage, overtime, and sick leave policies in each state

Quick And Accurate Payment

Payroll operates at its smoothies when all of the following are in place and functioning well: 

• Online management: Employees can log hours and supervisors approve them—all online—without the need for actual paper.
• Payment is fast and accurate: A smoothly-functioning system to track overtime, submit time cards, and obtain supervisors’ approval.
• Benefits eligibility: There is a process in place to know when employees become eligible for benefits.

The Bottom Line

Everyone is trying to figure out labor laws and fair pay. The gig economy and the worker classification challenges it brings to the forefront are top-of-mind topics for the government, employers, and employees alike.

PayReel knows the biz and the people in the biz. We are ahead of the game with every possible change and are ready to research and take the necessary steps. We stay up to date on payroll regulations and assist clients in navigating the increasingly complicated waters of payroll services.

If you think you might need a partner, rest assured the PayReel team is on top of following all regulations, rules, and federal and state laws. In a nutshell: We stay ahead of the curve so our clients never even have to think about payroll services and compliance.

President Biden’s warning to businesses was clear: Russian cyberattacks are coming. 

Tensions amid sanctions and Russia’s war in Ukraine are high and Putin’s playbook for countering such measures includes cyberattacks on essential aspects of American life. Consumers will remember last May’s cyberattack on Colonial Pipeline, which cut off nearly 50% of the fuel capacity for the East Coast as well as an attack against Meatpacker JBS from June, which threatened the food supply chain. 

Attacks that target food supply and fuel make the aim clear: the more disruptive to essential aspects of daily life for Americans the better. 

Protect Yourself 

The White House urged companies to take measures to protect themselves from these attacks and have also advised what to do if security measures fail. The list of measures for businesses is extensive, but one measure every single business and individual should take–as basic digital hygiene—is to use multi-factor authentication on all accounts. 

An Ounce of Prevention is Worth a Pound of Cure

PayReel takes cybersecurity very seriously and follows the above guidelines, including running exercises, encrypting data, and educating employees. Any disruption or inconvenience required up front is small in comparison to the havoc a successful attack may cause. The time is now.

Compliance is hard, time-consuming, high-stakes work. Many companies find that keeping on top of the ins and outs with an in-house team gets harder as laws change (and then change again). Whether you partner with a payroll service or build a team to do the job, you want to be sure they’re fully in position to protect you and your company. 

What to Look For In an Employer of Record

1. Ability to Diffuse Legal Landmines 

Contractor/freelancer payment and compliance regulations are ever-changing. Hedging your bets on the legal front means mitigating compliance risks, making sure you are compliant, educating yourself on practices that could compromise you, knowing the state and federal differences in minimum wage and sick leave policies and more. You should also be ready to head off potential vulnerabilities by teaching employees how to appropriately fill out timesheets.

2. Paying Accurately And On Time

This seems obvious, but nothing will tank your credibility faster than having employees come to you over inaccurate or late payment. This is especially difficult if your workers are in multiple states (and therefore, under different legal requirements). If you’re not ahead of tracking benefits eligibility and overtime, you’ll lose trust with employees, which affects employee morale. Services with online management for employees and managers as well as practices in place to prevent unnecessary overtime will help payroll services run like a dream.

3. They’re Ready For Changes

The most effective teams have dedicated people to researches changes as they happen so the company can take the necessary steps. They read forums like a boss and stay up to date on payroll regulations in every state. Navigating the increasingly-complicated waters of payroll services means making sure you’re following all regulations, rules, and federal and state laws. 

The Bottom Line

Labor laws and fair pay standard practices are in a constant state of change. The gig economy and the worker classification challenges it brings to the forefront are top-of-mind topics for the government, employers, and employees alike. Whether it’s your internal team or a partner, pick someone who can stay ahead of the curve so you never even have to think about payroll services and compliance. Life and work is chaotic enough.

As a payroll partner, PayReel makes compliance and payroll the easiest part of your day with a full range of services. We make sure our clients are able to hire who they want, when they want and see that everyone is paid properly. Contact us anytime at 303-526-4900 and meet the PayReel team here!