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.
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.