Do You know the Difference Between an Independent Contractor (1099) and an Employee (W-2), in Business and at Work?
Debra J. M. Best, SPHR, SHRM-SCP
Outsourced / Interim HR Leader / Adviser for National & Local CEOs & CHROs | Strategic Planning | Harassment Prevention Training & Investigation | Internal Hiring | Mediation | Owner, Deb Best Practices - NYS WBE
Need to hire seasonal help for the upcoming holiday season? It's also the time of year when employer colleagues are reaching out asking how to classify temporary help. Reminder: they're always temporary W-2 employees, not 1099 independent contractors. Knowing the difference and classifying W-2 employees correctly can literally save an employer thousands of dollars in state and Federal fines and penalties.
The State of New York is crystal clear and very specific about what constitutes a Independent Contractor. This definition, found on their?website, is designed to discourage employers from arbitrarily designating an individual as an Independent Contractor (1099), especially when the individual tells you that they would prefer to be a 1099 vendor rather than a W-2 employee. State and Federal DOL (as well as state Tax and Finance and the IRS) tend to frown upon the avoidance of paying unemployment and payroll taxes by either the employee or?the employer. Below are New York’s definitions of Independent Contractor and Employee, respectively:
Independent Contractors
It is vital that you understand the distinction between independent contractors and employees. This affects you and your business.
You may genuinely believe that you have hired people to perform services for you as independent contractors.?You may discover that by law they are considered employees and that you are liable for unemployment?insurance contributions?and interest. (Emphasis mine.)
Whether the relationship is one of employer-employee will depend on several factors. These include how much supervision, direction and control you have over the services.
The Independent Contractor Relationship
Independent contractors are free from:
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They are in business for themselves, offering their services to the general public.
Signs of independent contractor status include a person who:
In other words: ?an Independent Contractor has an established business. ?For example, my business,?Deb Best Practices, fits every NYS DOL definition criterion for an Independent Contractor.
The Employer-Employee Relationship
The courts have found that no single factor or group of factors conclusively define an employer-employee relationship. Rather, all factors are reviewed to determine the degree of supervision, direction and control exercised over the services. Generally, an employer controls what will be done, i.e. the manner, means, and results.
An employer-employee relationship may exist if you:
In order to minimize compliance exposure to your organization (and consequently save thousands of dollars in interest, back pay, fees, taxes and fines): do you know the difference between an Independent Contractor (1099) and an Employee (W-2) in business and at work?
Strategic Business Consultant @ Paychex/Oasis | Employee Benefits, HR
4 个月Great insights and details to consider to avoid misclassifying.