Are there some benefits of hiring an independent contractor?

Contractors are relatively cheaper than hiring permanent employees. Apart from paying salaries and other compensations, employers parts with other expenses such as payroll taxes, insurance premium among other benefits. When hiring ICs, you don’t need all these expenses. Hiring an independent contractor also minimizes exposure to a law suit.

What are some of the risk of hiring an independent contractor?

Although independent contractors offer a lot of benefits, misclassifying workers as ICs can be economically devastating. Businesses are expected to pay the IRS owed taxes with interest with a penalty of about 20%. States audit is more common, and most occur when workers classified as ICs apply for unemployment compensation after their services are terminated.

How can a business determine whether a worker is an employee or independent contractor?

There is no clear way of classifying independent contractors and the actual employees. Some of the legal test used by government employees includes the Internal Revenue Services, State Tax Departments, State Unemployment Compensation Insurance Agencies, State Worker’s Compensation Insurance Agencies, and National Labor Relation Board. Each of these institutions has different rules of classifying independent contractors and employees, and each of the agencies makes its own decision without considering what the other agencies have done.

Is it important to ask consultants and freelancers to sign written independent contractor agreements?

Yes, it is critical. Asking them to sign a written agreement helps avoid future disputes. The written agreement indicates the services that the IC is expected to perform, when he/she should perform and how much the IC should be paid. Written agreements also help to establish that a worker is an independent contractor.

Is there a specific procedure I should follow to ensure that the worker I employ is really an independent contractor?

The best way to ensure that the worker you are hiring is an independent contractor is to ask the contractor to fill out a questionnaire designed to elicit information that shows that the IC is actually running an independent business. It is also important to ask the independent contractor to provide you with documents that help to prove that the IC is actually self-employed.

Are there some specific steps I should take to avoid classification problems with government agencies? 

Yes. You should treat an IC like an independent business entity. For instance, you should not supervise, trained or want to require an independent contractor to attend specific hours or companies’ functions. If an independent contractor has completed a specific job, which he was hired for, avoid giving him another work before writing a new agreement. Also, don’t give IC other benefits or business cards.

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Employees and independent contractors are two types of workers who are usually controlled by a company or a businessman. These statuses indicate a type of employees the business relationship that exists between employer and employee.

The main difference between a contractor and an employee is a degree of control and independence that an employer renders. To determine the degree, there are three parameters: behavioral control, financial control, and type of relationship.

A status of an employee is a constant presence of an employer. An employee has a constant income and other benefits, such as compensation. An employee has a certain set of skills and specific duties in a company that is important for doing business. Employees have a fixed salary for a certain period of time (month, week, hour) and a possibility of promotion. In the case of an accident during work, the employer provides compensation for a worker.

In exchange for these advantages, an employee refuses certain benefits and independence. It manifests in a schedule or a kind of work. An employee is regarded as an integral part of a company.

Another difference is that an employee works in a presence of an employer in office. In addition, an employer provides tools and methods for work, including training and further training. Most enterprises prohibit their employees to have “part-time” jobs.

On the other hand, contractors provide specific services for other enterprises. An independent contractor may be an individual or a legal entity. Unlike an employee, a contractor has less control and more independence.

An independent contractor may at the same time have a lot of customers. He has his own tools and methods of work. They set their own time and work rules. They are considered to be the third party. They aren’t actually a part of a company. Contractors in California, as a rule, self-pay all the taxes.

What Is the Verification for Determining Who Is an Independent Contractor?

In California, there are many state agencies that possess their own tests for defining whether someone is an independent contractor. Though each test differs somehow, most follow the same main concept: The more monitoring that the employer has over how the worker performs the project, the more likely he or she is an employee.

The same test that is used depends on what agency is concerned in the classification. For instance, the United Employee Law Group(UELG) has its own test if it considers your employer should have restrained payroll taxes from your wages or if it is determining whether you’re suitable for unemployment benefits.

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Are you an employee or an independent contractor? And really, why does it matter? You’re getting paid all the same, aren’t you?

Not necessarily. There are distinct legal differences that you need to understand between the two, and whether you’re an employee or an independent contractor can affect your rights in the workplace.

How is your status determined?

In general, if you’re self-employed, you’re probably an independent contractor. If you work for a single company, you’re probably an employee. The California Division of Labor Standards Enforcement presumes that a worker is an employee, but each state agency has its own tests to decide which category someone falls into. The basic gist is this: The more control an employer has over how an individual does their work, the more likely they are in an employer-employee relationship. State agencies also look at other factors, including whether you’re doing work that a company regularly performs itself and how permanent your working relationship is with the company.

What is the difference between the two?

As an independent contractor, you’re performing work that a business would contract with you to do, such as writing or web design. You don’t just work for one employer, but contract with multiple clients. You set your own hours and fees, work from home or your own office, and set the terms of the contract with each client. An employee works for one business and has their work terms determined by the employer, such as hours, wages, and a supervisor who reviews their work.

What are the benefits to employees?

To begin with, an employer has to pay minimum wage, overtime, and payroll taxes for employees, as well as cover them under workers’ compensation and unemployment insurance programs. That’s not the case for independent contractors. Employers provide employees with benefits such as health insurance, sick leave, and 401(k) accounts. Independent contractors get none of these. Employees also are covered by state and federal anti-discrimination laws. Finally, employees usually get an hourly wage or yearly salary. Independent contractors are typically paid by the project, and only when it’s completed.

I think I’ve been misclassified. What can I do about it?

If you think you should have been treated as an employee and not an independent contractor, you may have a wage and hour claim against the company. Contact the United Employees Law Group to see if your rights have been violated and what can be done about it.

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When an organization hires workers, they are either classified as independent contractors or employees. It’s important that you make the correct determination, since employers can label their workers as independent contractors when they are actual employees. In such a case, the employer does not have to pay the minimum wage and payroll taxes. In addition, he or she may not reimburse the worker any funds spent when performing duties. Today, the State of California has imposed strict fines and penalties to any employer who misclassify his or her employees. Before you classify your worker as an independent contractor, it’s recommended that you familiarize yourself with factors that government agencies use when classifying a worker as an independent contractor.

Who is an independent contractor?

They perform duties using specialized skills and are not part of the company’s regular business. Further, they determine the time they spend to perform their duties. The less control an employer has on how an individual performs his or her work, the higher the probability that he or she is an independent contractor.

Independent contractor determination

There are different government agencies that use their own test to identify if someone is an independent contractor. They use the same basic concept although they can differ slightly. First, they analyze the control the worker has. If the employer controls why, when and how the worker completes his tasks, then he is an employee. However, if the employer has limited control on how the worker performs his duties, then he is an independent contractor. Secondly, if an employer supervises the worker strictly, then he’s an employee. If the employer has limited control over the worker, then he’s an independent contractor. Thirdly, if a worker does not form an integral part of the employer’s business, he’s an independent contractor.

What you should do if you have been misclassified

If you are an employee and your employer has been treating you as an independent contractor, you should file your case with an agency. You will be assisted in collecting unemployment insurance and wages. On the other hand, the employee can seek legal advice from United Employees Law Group attorneys to enforce his or her rights.

What should employers do to mitigate potential misclassification?

Determination requires exercising sound judgment. The business should come up with a written agreement which describes the scope of work, timing, compensation, and tax obligations of the worker. In addition, the employer should ensure if a worker is an independent contractor, he or she has a pertinent license that is up to date.

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