Clients tell us they grapple with worker classification over and over. They wonder whether workers should be treated as W-2 employees or as 1099 independent contractors. It can be a complicated subject and every time the game changes, the rules change, too. Fortunately, with brand ambassadors, it can quickly become simple. The answer comes down to the way you answer one question.
How Does The IRS Distinguish Between an Independent Contractor And an Employee?
One of the most foundational questions the IRS considers is how much control the employer has over a worker’s schedule, payment, and other aspects of their job. The greater control the employer has, the more likely the worker will be considered an employee. For example, workers will be considered employees when most of the following statements apply:
*Clients set expectations for work hours
*Workers perform services and expectations in a certain order (as directed by the client)
*Workers submit reports
*Workers perform their duties onsite at a specific location and for a set event
*Workers are paid hourly rather than on a project basis
Independent contractors, on the other hand, are autonomous workers and are not required to set a schedule (i.e.: show up at a specific time for a specific event) or perform tasks in a certain order. They are also often paid on a project basis rather than hourly.
Where do Brand Ambassadors Land And Why Do Companies Care?
The above description for an employee usually applies to brand ambassadors. Their work simply does not look like the complete autonomy the IRS requires to consider a worker a true 1099 independent contractor.
If the answer really is this simple, why do companies want to justify a different decision? One of the most consistent arguments for attempting to classify any worker as a 1099, regardless how thin the justification, is that it’s cheaper. And it is! At least up front. But if there’s one thing we’ve learned, it’s that the IRS is paying attention. Should you ever get caught misclassifying a worker, you’ll find out it’s not so cheap after all. Aside from the money you risk sinking into paying criminal and civil penalties, you also risk losing credibility along with energy and valuable human resources spent dealing with the issue.
It’s stressful. It’s costly. It’s just not worth it.
The Bottom Line
In most cases, we’d absolutely recommend calling a brand ambassador a W-2 employee. If you need advice on your specific situation, our team knows this stuff inside and out.
