While it’s common for businesses to hire independent contractors for temporary or sporadic projects, the repercussions for incorrectly classifying a worker as an independent contractor are numerous and substantial. It’s important for an employer to detail the relationship with an independent contractor agreement in order to avoid a costly dispute down the road.
Employers have a distinct advantage in classifying workers as independent contractors. The most important reason is that it saves money.
For employees, an employer is required by law to pay for unemployment, Medicare, and social security taxes for each employee; for independent contractors, employers escape from having to pay these taxes. Navigating through the murky waters of accurate employee classification can result in a shipwreck. Companies are recommended to work closely with an attorney to ensure proper classification as either an independent contractor or an employee and effectively put it into writing.
For employees, an employer is required by law to pay for unemployment, Medicare, and social security taxes for each employee; for independent contractors, employers escape from having to pay these taxes. Navigating through the murky waters of accurate employee classification can result in a shipwreck. Companies are recommended to work closely with an attorney to ensure proper classification as either an independent contractor or an employee and effectively put it into writing.
