Here’s What You Should Know About Proper Employee Classification
Not all employees are classified equally. The truth is you’d be hard-pressed to find an organization with just one type of employee working for them. While tedious and incredibly complex, proper employee classification is important for a business to stay compliant with labor laws. It is also an important undertaking that determines the application of human resource policies as well as the benefits that a particular employee is eligible to enjoy.
In this article, we will discuss the different kinds of employee classification and the consequences of misclassifying an employee. Keep reading to find out more!
But first, what exactly is an employee?
An employee is an individual hired by an employer to perform a specific job. According to the Internal Revenue Service (IRS), an individual who performs a service for an employer is considered an employee particularly if the employer maintains full control of how the service will be performed.
What are the different kinds of employees?
There are several kinds of employees that an organization can hire. The most common employee classifications are:
● Full-Time Employees – Traditionally, we associate full-time employees with those who work at least 40 hours per week. However, according to the IRS, full-time employees can be considered as those who work at least 30 hours per week or 130 hours per month. Generally, full-time employees are entitled to health insurance, paid leave, as well as other benefits determined at the discretion of the employer.
● Part-Time Employees – Part-time employees, or seasonal help, are those that work less than the standard 40 hours per week. The definition of a part-time employee can be confusing as companies may have varying definitions of what a part-time employee is but usually, their compensation and benefits (if there are any) are determined by the number of hours that they work weekly unlike full-time employees that are salary-based.
● Temporary/Contractual Employees – As the name implies, temporary or contractual employees are people who perform a specific job for a limited period of time or those hired to work on a short-term project. Temporary workers often come from staffing agencies that fill positions based on the talent that a company needs for a particular task or project. However, the relationship is strictly between the company and the staffing agency.
● Independent Contractors – Basically, independent contractors are self-employed workers. While independent contractors provide a service for an organization, they are not considered employees and are not eligible for employee benefits.
What are the consequences of misclassifying an employee?
If it has been proven that your business has misclassified an employee, expect to pay heavy fines and/or penalties from the U.S. Department of Labor, the Internal Revenue Service, and other state agencies. If an employee chooses to file a complaint, your business may also be responsible for covering benefits that are owed to them as well as back payments on social security and medicare contributions.
How can you protect your company from worker misclassification?
To avoid misclassifying an employee and paying hefty fines, you have the option to hire a service provider. Service providers can help staff your business with qualified employees. Saving you from the hassles of the cumbersome recruitment process. A service provider would also help you save time as they already have access to a broad network of competent candidates depending on the talent that your company needs.
Wrapping Up
Put simply, misclassifying your workforce increases your risk of being audited. To prevent this, make sure to review current worker classification practices and ensure that your recruitment process is being handled by an experienced HR professional or a staffing service provider. As previously mentioned, being caught misclassifying your employees, even unintentionally, can lead to grave consequences that you may want to avoid at all costs.
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