Employer misclassification is a common occurrence in workplaces. Solving it is never easy either. Sometimes, employee misclassification can be unintentional because the organization does not fully understand how to legally classify its workforce. It can also be intentional when the employer is looking to cut corners and avoid payroll taxes or reduce the cost of labor.
Regardless of the reasons, misclassification can be highly costly to the organization. Besides the legal consequences, it can also hurt the organization’s reputation. Here are three tips to help you minimize the risk of misclassifying your workforce.
Understand the complexities of misclassification
There are a variety of laws and regulations that a business must abide by when classifying workers as independent contractors. With the changing workplace dynamics, it goes without saying that these laws and regulations are equally evolving. This requires employers to understand what is acceptable both at local, state and federal levels.
Understand what independent contractors are entitled to
Understanding independent contractor rights can help the organization develop a better classification matrix that eliminates confusion and overlap of roles. For instance, it helps to understand that independent contractors have a right to work for multiple clients, handle their taxes, provide invoices for work done and openly promote their services to potential clients, among other rights.
When all is said and done, employee classification is a sticky yet important issue. As such, it takes more than just indemnification and adhering to classification provisions to attain full compliance. Establishing an effective employee classification program is something most businesses lack the resources and time to implement. And this is where expert help comes in.
With the emergence of the gig economy, employee misclassification is becoming a major challenge for many organizations. Learn how you can protect your business from the problem of workforce misclassification.