WORKER CLASSIFICATION

working overtime - PayReel

Overtime exemptions are on hold. How will it affect you?

Overtime exemptions are on hold. How will it affect you? 1756 1241 PayReel

 

A ruling slated to put an additional $1.2 billion per year in workers’ pockets is now on ice. Here is the state of the Fair Labor Standards Act (FSLA) and what it means for your business.

 

What exactly is  the FSLA?

The Department of Labor’s (DOL) FSLA includes new overtime exemptions. If and when it goes into effect, the law will nearly double the salary threshold (from $455/week to $913), thereby making up to 4.2 million more people non-exempt and eligible to be paid overtime.

On November 22, 2016, a week before the ruling was to take effect, a judge in Texas won a preliminary injunction against it. While the twenty other states that fought to end the act breathed a sigh of relief, the DOL cried foul and filed an appeal.

As of this posting, the battle continues.

 

What do stalled overtime exemptions mean for businesses?

Like all things involving government and money, it’s complicated. And it’s likely to cause headaches for anyone digging in to the nitty gritty details.

With the issue in limbo at a federal level, states are trying to figure this thing out on their own—which makes room for a lot of gray areas. Gray areas are where lawsuits live. There are different labor laws at the federal and state levels. In most legal situations, federal trumps state. It’s different with labor laws, though, because states are only required to use federal guidelines as a baseline.

Another place with plenty of room for confusion is worker classification, which we cover in an ongoing blog series here. Often, workers fall into both exempt and non-exempt classification categories, which affects eligibility for a slew of benefits, including overtime. In these cases, classification depends on a weighted scale of the employees’ duties. It’s shockingly easy to misclassify workers and rack up legal fees and fines before you know it. Classifying workers correctly the first time around puts employers in a better position to adjust to changing laws in the future.

PayReel’s policy pros—in conjunction with our custom PayReel OnLine software—protect your sanity and your finances by sifting through the legal complexities and taking responsibility for your workers. As the employer of record for our clients, we are the ones on the hook if we get it wrong. The good news is, that rarely happens.

With PayReel, you can hire who you want, when you want, without worrying about overtime exemptions and worker classification. As the ones who are legally liable for our employees, and morally liable to our clients, we’re dedicated to understanding the ins and outs of both so we can make the right decisions.

 

What’s the bottom line?

The end of the year is a great time to review your payroll practices to be sure you are compliant or are in a position to stay compliant as laws change. If you don’t have the time, resources, or expertise to make sure you’re not trapped in a legal gray zone, get in touch with a team who does. PayReel’s policy pros are available around the clock at 303-526-4900, or you can shoot us an email by clicking here.

 


 
Nat's notes

About the author

PayReel Customer Experience Manager Natalie “The Go Getter” McGinnis recapped 2016’s biggest news in freelancer management to help you prepare for 2017. Nat’s experience in recruitment and customer service set her up for success in providing laser-focused attention and assistance to the PayReel employees and clients who need it the most. Click here to read more of Nat’s Notes and meet the rest of the PayReel team by clicking here!

 

clock - PayReel

Payrolling freelancers? Here are 4 ways to be ready for new overtime rules.

Payrolling freelancers? Here are 4 ways to be ready for new overtime rules. 3504 2336 PayReel

 

The Department of Labor’s Fair Labor Standards Act (FSLA) will make about 4 million more workers eligible for overtime on December 1st, 2016. With 21 states suing to end the act altogether, some businesses may be hoping it all just goes away before they have to make changes. But waiting is risky. Getting ready for upcoming changes now ensures companies stay in good standing with employees and the government, too.

 

Four ways to prepare for payrolling contract employees in light of new rules

 

1. Provide a daily guarantee for a pre-negotiated flat rate for contractors. Budget for overtime if applicable.

2. Start tracking time accurately. Businesses and contractors using obligatory, inaccurate timecards need time to adjust to new processes.

3. Classify workers correctly up front. This is a big one because it sets you up for success. In fact, you can read a whole slew of advice on the topic by clicking here.

4. Read our previous posts on what the Volkswagon scandal teaches us about the FSLA and payrolling and four ways to prepare for changes to contractor payroll.

 

The production industry must adapt to remain competitive. And it may wreak havoc on some budgets in the short term. But this whole thing goes beyond the numbers. Companies that treat people fairly attract high quality workers. And when people feel valued, they go above and beyond. Proactive compliance is good business.

 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

 

over time pay roll timesheet - PayReel

Ten questions to help you decide if you really need to pay for payroll services

Ten questions to help you decide if you really need to pay for payroll services 5472 3648 PayReel

Time is money. And when you have a tendency to get buried under onboarding, vendor payment, classifying temporary employees, and other hiring details, time is priceless. Here’s a brief quiz to determine if hiring someone to handle your payroll services might be worth the investment.

 

Do you regularly hire independent contractors and/or temporary employees?

 

Is said hiring and onboarding one of the most time-consuming parts of your role?

 

Do old school payment processes or corporate legal concerns cause frustrating bottlenecks?

 

Is your desk/desktop cluttered with binders, folders, and paperwork?

 

Have you ever made a contracting mis-hire because of a time crunch?

 

Do you get pulled into fighting payrolling fires at least once a month?

 

Would a high level of service free you up to focus on other aspects of business?

 

Do concerns about compliance, worker classification, IRS audits, and workforce headcount keep you up at night?

 

Have you ever lost favor with one of your best contractors by paying late?

 

Do you have a reputation among contractors for paying late?

 

Not everyone needs a service like PayReel (especially startups and small businesses), but if your blood pressure went up as you read the list above, you might need PayReel. For those who need quick/frequent access to qualified contractors or who want to take all the risk out of dealing with the independent workforce, PayReel is a headache free solution. PayReel’s independent workforce engagement solutions makes classifying, onboarding, and paying your freelancers painless, paperless, and personalized. It’s about time.

 

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it. Relax. We got it.

game changer written on black board - PayReel

Be prepared: Is setting up independent contractors about to get harder?

Be prepared: Is setting up independent contractors about to get harder? 1000 750 PayReel

 

In any game-changing endeavor, the trailblazers have both the most to gain and the most at stake. Since its start in 2009, Uber, a spearhead in the gig economy, has earned a $62.5 billion valuation and forked out millions in legal settlements due to worker classification missteps. The gig economy and technological advances are redefining business as we know it.

Here are our answers to a few of the questions you need to start asking yourself about setting up independent contractors, hiring employees, and what it all means for the future of your business.

 

Am I setting up independent contractors or hiring employees?

Nothing worth doing should be too easy—and that certainly applies to setting up independent contractors. Mistakes can be costly and generate bad press.

The rule of thumb is that independent contractors have a great deal of say in how, when, and how often they work; but are not entitled to their clients’ company benefits. Generally, employees have less freedoms but are entitled to company benefits.

Worker classification is never simple, but we’ve done a whole series on the subject to make it easier for you to be prepared. If you’re still unsure about whether you’re setting up independent contractors or employees, our worker classification quiz can help.

 

Are there other worker classification twists that I should know about?

For those who don’t fit neatly into one of the two descriptions above, some economists advocate for a “…third category of worker for the gig economy: the ‘independent worker.’ These hands would have the right to organise and would have social-security contributions made on their behalf. But they would not receive the minimum wage or unemployment insurance.” 

The game is changing and it pays to stay abreast of of the laws surrounding worker classification, setting up independent contractors, and hiring employees. Don’t have the knowledge or the time to immerse yourself? You know who to call. (Hint: it isn’t The Ghostbusters.)

 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

 

uber on cell phone logo - PayReel

Uber Lessons on Avoiding Worker Classification Problems

Uber Lessons on Avoiding Worker Classification Problems 3917 2611 PayReel

Need a ride? Get a Lyft.

Want a meal? Here’s your hub for grub.

Need a bed? Skip the air mattress: Airbnb instead.

Companies providing on-demand products and services have revolutionized the economy. And Uber is at the front of the pack; pushing boundaries in both worker classification and technology. While this new frontier is sometimes undefined, it is still subject to fines and lawsuits—both of which are eating into Uber’s profits.

With its latest settlement of at least $84 million, Uber avoided having to classify drivers, who are currently independent contractors, as employees. The battle may not be over, but in the meantime, all businesses can learn a few things from Uber’s über settlement.

1) Communicate, Communicate, Communicate  

Fuzzy terms cause mistrust among employees, independent contractors, and consumers alike. Several disputes with Uber boil down to its lack of transparency. Los Angeles and San Francisco allege the company misled customers. Even Uber’s CEO Travis Kalanick acknowledged a communication failure with its drivers, saying,

“…as Uber has grown—over 450,000 drivers use the app each month here in the U.S.—we haven’t always done a good job working with drivers. For example, we don’t have a policy explaining when and how we bar drivers from using the app, or a process to appeal these decisions. At our size that’s not good enough. It’s time to change.”

2) Invest In Worker Classification

The complaints against Uber point to the fact that any gray area in how a worker is defined can cause trouble. What’s worse is that the rules for setting up an independent contractor aren’t always easy to interpret. In fact, we have a whole worker classification series as well as a worker classification quiz to help you understand the law and avoid costly fines. 

In addition to setting up independent contractors correctly, having an airtight system in place for consistently payrolling all of those contractors also protects against future headaches. Confusion over worker classification and inconsistent payment practices can lead to fines, lawsuits, and unhappy workers or customers—all of which are damaging to business. Any way you slice it, making sure you get it right up front is worth the investment.

Need help getting worker classification right? Well you’ve come to the right place, because we’ve been doing just that for three decades. Contact us today and avoid the fines and lawsuits. 

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail—down to worker classification—perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.

myth button - PayReel

This Worker Classification Myth is Hurting Your Business

This Worker Classification Myth is Hurting Your Business 2000 2000 PayReel

Sorry, y’all: The five-second rule is bogus. Germs don’t offer a grace period before jumping on your food. Not even your last bite of the really delicious stuff. But that one about metal objects dissolving in a glass of Coke? Still up for debate. And we won’t be testing it to find out.

Myths can be dangerous, silly, or in the case of worker classification—bad for business.

There is a fine line between an employee and an independent contractor and laws surrounding worker classification are confusing. We’ve seen companies go to great lengths to comply with nonexistent rules, so we were compelled to bust one of the most damaging worker classification myths we’ve seen.

The Myth About Worker Classification

After a certain amount of time working for you, an independent contractor must be reclassified as an employee.

We think this myth likely comes from one-time best practices that were interpreted as hard and fast rules. Wherever the myth comes from, we’ve seen clients build all sorts of policies to get around the supposed law. We’ve seen them hire workers for six months, drop them for a period of time, and then rehire them, for example. Some companies even refuse to rehire independent contractors after working with them for a certain amount of time because they’re afraid they’ll have to provide all of the benefits associated with hiring an employee. Not only are these policies time consuming, they can hurt businesses that rely on trustworthy freelancers.

The Truth About Worker Classification

We think it’s time for everyone to bust the myth and bust free from self-imposed restrictions.

Here’s the liberating truth: If you find a good contractor and want to use them over and over, you can. There are rules, which vary by location, but there are also legal ways to keep your best people working for you.

If you’re confused by compliance laws and fear your workers are misclassified, PayReel can help. Reach out to our team of experts on all things freelance. Get away from the burden of onboarding, payrolling and classifying your workers and focus on what you love.

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.

homeless man - PayReel

Classifying Employees and Independent Contractors—A Worker Classification Cheat Sheet

Classifying Employees and Independent Contractors—A Worker Classification Cheat Sheet 5760 3840 PayReel

Employee misclassification is on a lot of people’s minds. Hillary Clinton has even made it a part of her campaign. It’s pretty irritating that the rules are confusing, vary from state to state, and are often subjective, but there are a few standards that remain true across the board.

If you want to get all the rules straight from the horse’s mouth/in the government’s own words, you can get the whole scoop right here. This covers the 20 factors they consider in full, governmental legalese.

Skip the legalese and give me the highlights, you say? You got it. According to this article on Forbes, a few consistent factors apply to “most worker status cases.” Should you find yourself trying to defend your worker classification choice, the following elements are most likely to be considered:

  • The employer’s degree of control over the worker
  • The worker’s opportunity for profit or loss
  • The worker’s investment in facilities
  • How long-term the relationship is
  • The worker’s skill set

As you are classifying and auditing your current classifications, start by examining the basics above and dig deeper when you’re ready.

In the meantime, check out our series on the subject:

Worker Classification: Top Ten Classification Compliance Mistakes

Worker Classification: 5 Reasons Companies Can’t Ignore Compliance Rules

Worker Classification: What’s the Problem And Why Should You Care?

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail—right down to worker classification—perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.

money and taxes - PayReel

Top worker classification mistakes to avoid

Top worker classification mistakes to avoid 6144 4096 PayReel

Employee misclassification is getting to be a big deal for government and a bum deal for businesses. Back in 2000, Microsoft paid $97 million, plus legal fees, in a benefits dispute with its long-term temps. More recently, FedEx shelled out $228 million. And then there’s Uber, which just lost in a dispute over whether drivers were independent contractors (as Uber maintained) or employees (as the law determined). In short, this stuff matters.

Here are ten moves that increase your likelihood of ending up in hot, expensive water.

 

1. Letting contractors decide how they get paid

Businesses have the burden of responsibility here. Do your due diligence with each worker to determine their status and whether they should be paid via W2 or 1099.  Our worker classification quiz can help you identify your workers. When in doubt, engage someone with the expertise to guide you through it.

 

2. Doing something the way you’ve always done it

Similar to the above, if the law says it’s not okay, you will be held accountable—no matter how long you’ve done it without problems.

 

3. Not making sure workers are properly insured

When stuff goes wrong, you’ll be glad you took the extra effort. That goes double when there’s a lot of expensive gear around, which tends to happen frequently in the media industry.

 

4. Thinking you can eliminate risk by hiring an agency

Engaging a partner company with the right expertise is hugely beneficial and will help ensure that your business is on the up and up. But, co-employment risk still exists. It’s still in both you and their best interest to know and implement the rules around worker classification.

 

5. Following the industry norm

Take a lesson from sibling dynamics here: The kid who gets caught doing the crime does the time—even if the sibling does it all the time undetected. Just because you or and you’re associates haven’t been caught with misclassified workers doesn’t mean you won’t be eventually. 

 

6. Downplaying the hype

The government has a lot of money at stake here. It’s in the news a lot for a reason and it’s not going away. Don’t ignore the rules because the government isn’t ignoring them either

 

7. Assuming day rates are compliant with the law

Although common in the video production industry, day rates aren’t always as simple to apply as they seem. It takes a lot of time and a complex system to monitor day rates and other compliance loop holes in every city and state.

 

8. Overlooking details of exempt vs. non-exempt

Workers are often called exempt when they should actually be paid hourly according to federal, state, and (sometimes) local law. Again, it’s hard to keep track of. Either invest in doing worker classification right the first time or cut a check to the IRS. 

 

9. Thinking this process is clear cut

The government provides guidance, but rules are ever-changing and never 100 percent clear. Asking a few questions and counting the check marks in the 1099 or W2 columns isn’t enough to ensure you classify someone correctly. If you are not an expert, you really need a partner. Engaging someone with specific industry experience who has endured audits is invaluable.

 

10. Forgetting that courts often rule on the side of the worker

The system is heavily weighted on behalf of the worker and the burden remains on the employer to do things right.

Yes, it’s important. Yes, it can be a pain. But there’s no need to cut the cord on independent contractors. Keep your worker classification processes at the front of your business priorities or hire a team who can handle your contingent workforce from onboarding through payrolling. 

 

Interested in learning more about worker classification? You’re in luck, we’ve got a whole series here.

 

About PayReel

Producing multimedia content and executing live events is chaotic. At PayReel, we make sure our clients are able to hire who they want, when they want and that everyone is paid properly. Leave the details up to the PayReel team so you can focus on pulling off a flawless production. Contact us anytime at 303-526-4900 or by emailing us here.

Relax. We got it.

 

compliance legal rules - PayReel

Worker Classification: 5 Reasons Companies Can’t Ignore Compliance Rules

Worker Classification: 5 Reasons Companies Can’t Ignore Compliance Rules 4506 3811 PayReel

With the rise of the shared economy, workplace compliance issues are surfacing at an alarming rate. Uber and similar enterprises have been at the forefront of news on the subject of late, but the IRS is expanding its attention. And when the IRS pays more attention to this topic, companies need to do the same or risk costly, damaging, and time-consuming consequences.

Here are five reasons you can’t ignore the rules:

  1. Because the government isn’t ignoring it:

For years, government regulations have been lax, leading to the equivalent of a jaywalker’s attitude among businesses. The thought being that it’s okay to ignore the unnecessarily-restrictive law as long as you look both ways.

But as independent contractors rise in prevalence, the financial stakes for the government get higher. In response, government agencies have been ramping up their focus on the subject, not ratcheting down.

According to this white paper, in addition to the Internal Revenue Service (IRS) and U.S. Department of Labor’s attention to the matter, state task forces have been formed to “crack down on businesses that do not pay unemployment insurance and workers’ compensation premiums or that withhold taxes for workers whom states claim to be employees and not independent contractors.”

  1. Consequences are Expensive

There’s big money at stake. In addition to potential back pay for benefits, you’re looking at a per employee fine and potential legal fees, too. FedEx knows: They just shelled out $228 million in a mislabeling case. You can ask Microsoft who paid $97 million, plus millions in legal fees in a benefits dispute with its long-term temps, too. And most recently, there’s Uber which just lost in a dispute over whether drivers were independent contractors (as Uber said) or employees (as the law determined).

  1. Here come the lawyers

Where the money goes, the lawyers follow.

According to the same source, it’s not just the government in the game, “Class action lawyers continue to target some of those same types of companies, seeking unpaid employee benefits, expenses and overtime for workers who are not treated as employees.”

Just when you thought government scrutiny was driving you crazy enough.

  1. Because “We didn’t mean to” doesn’t hold up in court

When you knowingly misclassify employees as independent contractors, it’s called wage theft. When you do it accidentally, it’s called wage theft.

Yes, the rules are confusing. And like many things government, oh what a tangled web the federal and state laws weave. Some laws are interpreted differently from state to state and some tests used to determine status are subjective.

But there are some consistent contributing factors. For 20 relevant factors in considering status (straight from the horse’s mouth), see the IRS’s Present Law and Background Relating to Worker Classification for Federal Tax Purposes. It’s a good place to start.

  1. Consequences to Credibility

In addition to the financial burdens and time-sucking nature of it all, your credibility is on the line. Getting audited is a PR nightmare and depending on the industry or nature of the client company’s business, the press would love to expose a company’s misclassification and actual or perceived abuse of labor laws.

Getting the government, lawyers, and media on your case is a guaranteed trifecta of pain.

It can be overwhelming, but even the chief misclassification enforcement officer of the federal government (Dr. David Weil, Administrator of the Labor Department’s Wage and Hour Division) recognizes there is a legitimate place for independent contractors, sayingthe use of independent contractors [is] not inherently illegal, . . . [and] legitimate independent contractors are an important part of our economy.”

The best way to stay in the clear is to stay in the know. So get smart and there’s no need to burn your W9s and run for the hills.

See our intro post for a nutshell version of what worker classification is and why it matters to the IRS.

Need more?

Worker Classification: What’s the Problem And Why Should You Care?

Classifying Employees and Independent Contractors (A Cheat Sheet/Resource List)

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.

thin ice sign - PayReel

Worker Classification: What’s the Problem And Why Should You Care?

Worker Classification: What’s the Problem And Why Should You Care? 550 459 PayReel

Employee misclassification (noun):

  1. The kiss of death for companies.

See also: Number one on the IRS’s list of least favorite things.

The National Conference of State Legislatures provides an alternative description here: “Employee misclassification is the practice of labeling workers as independent contractors, rather than employees.”

As the shared economy blossoms and remote work becomes the new normal, independent contractors are on the rise. This is great for businesses and certainly for workers, too.

Businesses like using independent contractors because they’re affordable (no need to pay for health insurance, 401Ks, and other benefits) and they can hire à la carte  for just the services they need, whenever they need them. Likewise, many workers prefer the autonomy of contracting, including flexibility in their schedules and the ability to work with a variety of companies on a variety of projects.

For the same reasons though, the IRS finds the rising trend troublesome. For employees, businesses are equipped to make sure they stay in line with labor laws, benefits, worker’s comp, unemployment insurance, and of course, tax withholding. Independent contractors, on the other hand, can operate in the wild, wild west of legal lands. They may or may not pay taxes properly, they may overstate their deductions, and they are just harder to keep tabs on (all of which are among the IRS’s least favorite things).  

There are legitimate independent contractors and businesses who employ them properly, but misclassifying an employee as an independent contractor can be incredibly damaging, costly, and time consuming. Just ask Uber and FedEx.

If you haven’t paid attention to it yet, it’s time.

Need more?

Worker Classification: What’s the Problem And Why Should You Care?

Worker Classification: Five Reasons Small Businesses Can’t Ignore Compliance Rules

Classifying Employees and Independent Contractors (A Cheat Sheet/Resource List)

About PayReel:

PayReel’s clients, who are some of the biggest companies in the world, are constantly immersed in the chaos of producing multimedia content or executing live events. PayReel makes sure they have the right contractors at the right time in the right place, and that everyone gets paid properly. And, most importantly, they handle every last detail perfectly while making sure their clients think nothing of it, so they can get back to doing what they do best.