Employers, facing limited budgets with no reduction in the work that needs to be done, are often enticed by the ease of using independent contractors. The practice may be going on in your organization without the knowledge of the human resources department, since payments are not run through payroll. It can be a costly error. The Internal Revenue Service (IRS) and state unemployment agencies can levy hefty fines in addition to collecting taxes on individuals improperly classified as independent contractors.
With the arrival of 2023, we expect a new, stricter rule on classifying independent contractors to come out of the U.S. Department of Labor (DOL) in the first quarter of the year, which will make this more of a focus for federal and state regulators.
Understanding the difference between an employee and an independent contractor is key, and Employers Council can help. Our Independent Contractor Status Check List can help you determine if a worker is properly classified as an independent contractor. If you are looking for more comprehensive information, our whitepaper Independent Contractors – Overview and Sample Agreement has a comprehensive explanation and a sample agreement. If the rules change and survive the inevitable legal challenges, Employers Council will update the documents and let you know they have been changed.
One easy way to think about the difference between an independent contractor and an employee is to consider if the work being performed is the work your organization does. A cook at a restaurant is not likely to be an independent contractor since the primary work a restaurant does is cook food for patrons. If you are concerned about this at your workplace or have any questions, contact us.
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