Are your service providers employee or independent contractors?
According to the U.S. Department of Labor (DOL), there is an alarming trend emerging in the workforce - employers are misclassifying service providers as independent contractors instead of employees. The DOL's Wage and Hour Division is dedicated to weeding out employers who are violating the Fair Labor Standards Act (FLSA) to ensure all workers, especially those in the lowest paying industries, receive proper compensation for their time attendance.
The confusion about classification arises out of situations in which employers are hiring or contracting individuals to provide a particular service, while the company is uncertain whether the workers should be considered independent contractors or employees.
According to the Internal Revenue Service (IRS), business must take into consideration the degree of control they possess over the employee. Before making a classification decision, employers should consider if the business wants to influence the way in which work is performed. If a company can exert a degree of control over a worker, the relationship might become similar to that of an employer and employee.
Another important factor is the financial relationship, the agency states. Usually, independent contractors are paid a flat rate for their services, while employees are paid at regular intervals through a payroll system.
If employers are uncertain about whether workers fall under the independent contractor exemption, they should seek expert advice from a payroll service or review the DOL's guidelines to make sure their policies are in compliance.
The confusion about classification arises out of situations in which employers are hiring or contracting individuals to provide a particular service, while the company is uncertain whether the workers should be considered independent contractors or employees.
According to the Internal Revenue Service (IRS), business must take into consideration the degree of control they possess over the employee. Before making a classification decision, employers should consider if the business wants to influence the way in which work is performed. If a company can exert a degree of control over a worker, the relationship might become similar to that of an employer and employee.
Another important factor is the financial relationship, the agency states. Usually, independent contractors are paid a flat rate for their services, while employees are paid at regular intervals through a payroll system.
If employers are uncertain about whether workers fall under the independent contractor exemption, they should seek expert advice from a payroll service or review the DOL's guidelines to make sure their policies are in compliance.
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