Employee or Independent Contractor?
So you finally took the big step and hired some much-needed help. Great job. Now you can focus on your income-building tasks and leave some of the other things to your new helper. Your other business owner friends have suggested that you just pay this person as a contractor to save yourself some cash by eliminating work comp insurance or taxes. Sounds good right?
Well, before you go that route, let’s make sure that decision won’t come back to bite you in the labor department investigation ass…
Here are some ways that it will be determined whether your new assistant is an employee or an IC.
#1 Do you have control over this new worker? Do you determine when and where they work? What tools, machinery, supplies they use to get the job done? Do you need to train them to do their work?
#2 Do you own the equipment or supplies they use to complete their tasks? If they incur business expenses, do they expect you to reimburse them?
#3 Is the work they do for your company a key activity of the business? For example, do you own a repair company and this new worker does the repairs? Do you provide most or all of their monthly income?
If you can answer YES to most of these questions, or in some cases, even SOME of them, guess what? You just hired your first EMPLOYEE.
Better safe than sorry. The fines for misclassifying an employee can be steep and could result in having to pay back taxes on that employee’s behalf.