Some managers are discouraged from the use of independent workers and freelancers and in many cases, those who do feel like Damocles with the sword precariously hanging over his or her head! The stringent government guidelines and the well-publicized cases of litigation against employers tend to put employers on guard against hiring independent contractors confidently, without fearing the threat of a misclassification charge. When using independent contractors, employers face the risk of having the Internal Revenue Service (IRS) exercising oversight over their business activity and the right of enforcement over unpaid taxes due. All sensible employers fear the possibility of being hit with steep misclassification penalties, which are usually followed by negative publicity as well as a loss of their brand value with customers and prospective employees alike.
But it is possible to mitigate the concerns with classification and enjoy the option to build an agile workforce comprised of skilled professionals who prefer to be self-employed as they control their own work and chart their own career paths. The fear cannot deprive you of your right to access the best skills available out there along with the cost savings they bring to your business.
Here’s how you classify workers as independent contractors and still sleep peacefully at night. It is, however, not intended to help those employers who intentionally misclassify workers and hope that they will not get caught. Such employers need to remember that they are ultimately responsible for a misclassified independent worker, who is made to pay all work-related expenses, forego employment benefits and workers’ compensation, track all personal expenses and pay higher taxes. As such, workers are also constantly encouraged by the IRS to call attention to their classification and question its acceptability – the possibility of walking away from misclassification are low to non-existent. Here are some guidelines to follow:
As businesses wait to get some respite by having more clarity on the issue of independent contractor classification in this sharing, gig economy from the Department of Labor, none of these steps can eliminate the need for complete visibility into the use of independent contractors by the business. Regulatory changes may also be brought in, in the near future, setting clear and consistent set of criterial for the classification and making it easier for businesses to engage these workers while being compliant. Until then, these additional precautions will help you hire independent contractors without fear. Do you agree?
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