Compliance

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!

Just like any other insurance, workers’ compensation is a “just in case” plan you hope you’ll never need. But if you do need, it’ll save your butt a million ways and you’ll be so glad you have it. Workers’ compensation provides wage replacement and medical benefits to employees injured in the course of employment. 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. And let’s just get one of the most basic points out of the way: Anyone with employees needs workers’ compensation. Yep, everyone.

Four Steps to Mitigate Workers’ Compensation Risk

Step One: Prevent

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.

Step Two: Plan

Instead of scrambling to figure out how you’ll handle a claim if it comes up, take steps ahead of time. Make sure 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 you make sounder decisions. The added benefit is that it will reassure your adjuster that you’re engaged and motivated to reach a speedy resolution.

Step Three: Implement 

Implement a return to work program and have a plan for injured workers who have been cleared for modified duty. These measures reassure insurance companies while demonstrating professionalism to employees.

Step Four: Invest

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?

COVID-19 has changed workers’ comp in the short term, but its effects will continue to be felt. The issue is ever-evolving in any environment–with or without a pandemic. Analysts anticipate continued changes for the workers’ compensation industry ahead. 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.

Security is Everything 

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

Anyone else have a whole folder dedicated to CYB? How about a whole company dedicated to doing that on your behalf? That’s basically what an Employer of Record (EOR) is.

Clients usually come to us with three main CYB dreams for payroll

1. Keep workers happy with on-time, accurate payroll.
2. Keep the government happy with accurate worker classification and compliant practices.
3. Keep our lawyers happy knowing numbers 1 and 2 are happening seamlessly and consistently.

Within those dreams lie many other goals

1. To be able to hire quickly without changing headcount
2. To be able to hire freelancers for special projects
3. To hand off the legal risks of payroll and compliance to someone with the tools to get the job done right
4. To be able to onboard quickly
5. To be able to do business in multiple states without having to know all the rules of each of them 

In order to accomplish all of these goals, companies without a highly specialized internal team (nearly everyone except the really big companies) outsources payroll with either an Employer of Record (EOR) or a Professional Employer Organization (PEO). 

What does an EOR do?

An EOR handles payroll and takes on the paperwork and associated legal risks of employing people. It also allows businesses to add workers without changing their headcount. While an employee performs work for your business, the EOR serves as an employer for tax purposes and handles all personnel functions, including payroll processing, taxes, contracts, benefits, employment termination, background checks, worker performance issues, Certificates of Insurance, workers’ compensation, data security, and more. 

What does a PEO do?

A PEO partners with a business as a co-employer to provide HR services and allows a company to outsource some of the HR load. The business still holds all related liabilities and responsibilities and is also still required to carry its own insurance. PEOs are a good option for companies that need to outsource some services without handing off legal liabilities. 

We are in the business of protecting your business. 

Payroll is very complex and is one of the riskiest aspects of doing business as a highly-specialized process of doing payroll in a timely, secure and compliant manner. Payroll is also really easy to mess up. Errors are not just inconvenient and embarrassing, they are sometimes also incredibly costly due to IRS fines and other costs associated with righting a wrong.

Outsourcing payroll means outsourcing risk and makes business sense to most organizations and keeps the company in good standing with the people on the front lines as well as government agencies. 

Ready to CYB with an EOR? Well, here we are! 

There’s a battle playing out in court over which workers can be classified as independent contractors versus employees. The legal wars demonstrate one important fact for employers: The IRS takes the practice of hiring independent contractors very seriously. That means you should, too.

Independent Contractors (ICs) are self-employed and hired to do a specific job. They 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 those companies looking for outside creative resources, and 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 confidently be able to answer “yes”, because the risk of facing an IRS audit has never been greater.

Best practices when working with an independent contractor:

• Contractor has an established business entity, with a business name and EIN
• Your contractor provides services to other businesses outside your firm
• IC provides certificates of insurance, including at the least coverage for general liability insurance and worker’s comp insurance
• You have a signed per-project agreement for services between your company and the contractor
• Independent contractors work for multiple clients
• Projects have a contract specifying project length, compensation and liability
• Independent contractor does not function as a division of your company

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 with contractor payroll solutions

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.