Is Automation Helping Your Workforce Management or Leaving You Open to Risk?
AI and automation are changing how teams manage contingent workforces — but they can’t replace human judgment on classification, compliance, and payroll.
The legal battle over which workers can be classified as independent contractors versus employees is nowhere near close to over. Wherever the battles land, one important fact remains: The IRS takes the practice of hiring independent contractors very seriously. That means companies should, too.
While hiring an independent contractor is attractive for the potential money savings that come with outsourcing work that is not central to their main line of business, mistakes can quickly override any savings.
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. Making a misstep can be costly—whether it was intentional or not.
There is big-time tax money at stake. According to the court’s ruling on the landmark worker classification Dynamex decision, “the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue.” That’s billions with a B.
Small businesses can avoid certain taxes with fewer employees and independent contractors can write off business expenses and may also underreport their income. Hence the resulting “deprivation.” The IRS is motivated to recoup those lost dollars.
Audits and court costs alone are expensive and time-consuming even for businesses that do everything by the book. If you’re found in error, back pay adds up quickly. How much are you willing to pay in time and hassle alone?
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 e relationship to make sure you are in complete compliance.
Call us at 303.526.4900 or email [email protected].
AI and automation are changing how teams manage contingent workforces — but they can’t replace human judgment on classification, compliance, and payroll.
Accurate worker classification is important for any company but those with a contingent workforce are especially vulnerable to making missteps. It’s a topic the Biden administration is paying attention to as well. The administration’s recent decision to rescind the “Worker Classification Rule” makes it easier for workers to argue for minimum wage and overtime protections/compensation. Big company […]