As a business owner, you have to make a lot of specific decisions about how your company operates. From where you purchase your inventory to how you stay in contact with your customers, you have a lot to take care of.
But you may be overlooking some important factors that can dramatically change the way your business operates. One such seemingly innocuous detail is whether you classify certain workers as employees, freelancers, or independent contractors. In this post, we walk you through those designations and why you might choose one over another.
When you hire an employee, you have several specific duties to that employee. You must provide employer-employee benefits, pay Social Security and Medicare taxes, and attain the correct amount of workers’ compensation insurance.
Some businesses owners classify employees as independent contractors to get around these costs. However, this practice is illegal if the employee in question does not meet the criteria of an independent contractor.
A freelancer or consultant may be either an employee or an independent contractor, depending on the services they render to a company. If the individual qualifies as their own boss or business, he or she falls under the category of independent contractor. If he or she works directly for a company, the individual qualifies as an employee.
An independent contractor can be any type of worker in any field. Common examples include accountants, graphic artists, plumbers, writers, programmers, and engineers. As a business owner, you may pay a higher wage to work with an independent contractor, but you also have more flexibility with staffing and less risk of lawsuits.
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According to Ottinger Law Firm, this legal protection comes from the fact that independent contractors don’t have a minimum wage, the rights to unionize, or considerations for time off due to family member illness. And while there are some restrictions on how you can terminate a relationship with an independent contractor, they cannot sue for wrongful termination.
If you aren’t sure the way you should classify a specific worker under federal, state, or local law, reach out to an attorney. It’s better to ensure that you’re classifying each person you work with as you should than to risk legal action in the future.
Your attorney can also help you determine whether a worker is a freelancer or independent contractor if the service they provide is outside the list above. Use this list as a reference as you check that each worker classification is correct.
Author: Anica Oaks is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. She was raised in a big family, so she’s used to putting things to a vote. Also, cartwheels are her specialty. You can connect with Anica here. For more information about employee misclassification, Anica suggests you get in touch with the employment attorneys at The Ottinger Firm.