Avoid these mistakes when classifying employees

| Apr 27, 2021 | Employment Litigation |

As an employer, you will need to correctly classify anyone who is working for your business. You will need to have documentation to monitor whether they are a full-time or part-time employee, a contractor, seasonal worker or volunteer. The category into which an employee falls will dictate the compensation to which they are entitled under federal, state and local laws, as well as their eligibility for certain benefits.

It can be confusing to correctly classify certain types of employees, but failing to do so could get you into complications, and, in some cases, your employee may be able to take legal action against you. Don’t make the following mistakes when classifying workers.

Don’t base the worker classification purely on the written contracts in place

Let’s say that you have hired a secretary, and in the contract, you have stated that they are an independent contractor who is personally responsible for paying their self-employment tax. However, in the job description, the secretary has specific working hours and is provided with all the necessary equipment, and given specific instructions about their role. Even if the contract states that the worker is self-employed, this will not be recognized by the IRS when their worker status is evaluated.

Don’t pay employees and contractors similarly

It’s common for full-time employees to have either an hourly wage or a regular salary that they can depend on. Independent contractors should expect to be paid more than their fully employed counterparts because they have to pay their own taxes and are not the recipient of the same benefits such as paid time off.

Don’t forget to consider all aspects of the role

Make sure that you understand all of the worker’s tasks and responsibilities before classifying them, rather than relying purely on the contract.

Correctly classifying employees is a huge way to prevent lawsuits brought on by people you have employed. Make sure that you are proactive in your approach to remedying situations in which employees are misclassified.