How do you know if your workers should be paid like employees?

Hiring independent contractors is much less expensive and much simpler than onboarding employees. But if you pay someone who should be an employee as a contractor there can be steep legal and financial consequences. These liabilities can even attach themselves to the individual owners of the Company and, in some cases, pierce the corporate veil. Sometimes, our clients cannot afford to pay a certain class of workers as W-2 employees and doing so would shutter their business. Very generally speaking, workers should be paid as W-2 if multiple of the following are true:

• The Company trains them;

• They have to adhere to instructions on what to do;

• They are given equipment or a uniform to use or wear; (even software may be problematic)

• They render services personally instead of using agents or subcontractors to render services;

• They are supervised or given feedback or procedures to follow;

• The Company has a continuing relationship with them instead of being limited to a specific time frame;

• The Company sets their work hours and tells them where to work; and

• They don’t have other jobs or clients.

In addition to the above, there are numerous other at the state and federal level that should be considered. If your workers aren’t being paid correctly you can either change the 1099 workers into W-2 workers or you can change the way you use the workers. If you’d like to see if it’s possible to reconfigure your workforce to more accurately fit the role of independent contractors, reach out and we’ll help you.