Just as the stakes are getting higher, worker classification is getting trickier. The rise of the gig economy has led to an exponential increase in the number of independent contractors it brings into the labor pool each day. Lawmakers are taking note, and the government ain’t playin’. Tax and employment law violations can lead to severe consequences. Employers shouldn’t play either. Here are some ways to tell the difference between an employee and an independent contractor and some questions worth asking before bringing an independent contractor on board.
How to tell independent contractors and employees apart
This is a meaty subject with a mountain of government legalese to back it up. Thankfully, employers can look at some of the main factors the government considers to sort out any areas of confusion, including the following:
- 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
If you’re confused by gray areas, of which there are plenty, Upwork provides a simple IC v. employee compare-and-contrast chart that would make your high school English teacher proud. We also dive deeper and provide a handy cheat sheet and additional resources on the subject here.
But if you’re still uncertain, engaging a contractor management firm is your safest bet.
Questions to ask before hiring an independent contractor
1. Am I confident I could make a strong case for the classification we chose?
If there is any question whether you’re on solid ground with your decision, you’re probably on very un-solid ground. It’s worth engaging support to make sure you get it right before it hits the courtroom.
2. What are the consequences if I get it wrong?
Uber has provided über lessons on worker classification woes. It’s clear that the consequences can be steep and that the DOL is ready to drop the hammer on misclassification.
3. Do I need professional support and a built-in insurance plan to make sure I get it right?
Navigating the dangerous waters and staying compliant is harder and more important than ever. Worker classification is one of those areas in which you can’t afford to take risks. Partners who make your life easier are worth the investment. A payroll service may be right for those who don’t have the bandwidth or interest in digging into the legalese. At PayReel, we manage payroll taxes and, as the employer of record, we even take on all risk associated with a variable workforce. Think you might benefit from hiring a payroll service? Here’s a handy guide to find out more.
About PayReel
When it comes to event payroll, payroll taxes, and so much more, PayReel makes your life easier. 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 all payroll services and 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.
