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Classification

Mitigating Co-Employment, Misclassification Risk for Independent Contractors

Hiring the right employee at the right time, a candidate who qualifies as the right fit for a role and within a company culture, is a challenge. Meeting that challenge again and again is a skill. As a hiring manager, though, it’s possible to identify and bring aboard the best independent contractors for your company and still miss one key final step.

The appropriate classification of newly hired independent contractors is a crucial action that sometimes gets taken for granted. Laws classifying employees with W-2 or 1099 designations are nuanced and highly-specific, and a failure to grasp those details could land a company in hot water. One of the best ways to mitigate that risk is for a company to enter into a co-employment relationship with a third-party contractor agency.

Consider that the IRS maintains a 20-point checklist providing guidelines on whether an independent contractor should be paid on a W-2 or a 1099, but it’s up to the employer to make the determination of how its new hires will be paid according to the tax code. A misclassified employee can file a complaint against their employer demanding to be compensated for paid time off (PTO), healthcare benefits, 401k contributions and other considerations.

The financial risks for a company that misclassifies a new hire as a 1099 employee include back-tax assessments and fines – even penalties amounting to as much as 100 percent of the back taxes due at both the federal and state levels. Those back taxes may include all federal income taxes, all social security taxes and all unemployment insurance taxes not withheld.

Those are no small considerations for a busy HR department responsible for maintaining a high-flow pipeline of contractor talent. Any company that relies on a regular influx of specialized or project labor should strongly consider the downside of  a classification error – and the risk mitigation provided by working with a hiring agency or a talent cloud such as PeopleCaddie.

In a co-employment relationship where an employer hires independent contractors through a third-party employer, misclassification risks are dramatically reduced. Not only is the third party often better equipped to assess new hires under the classification laws, but as the employer of record, they are also responsible for ensuring compliance with all federal, state and local employment laws. A hiring department that uses a service such as PeopleCaddie can focus on the quality and fit of contractor candidates rather than the red tape typically involved in the hiring process.

A co-employment relationship with a third-party hiring agency not only offers numerous advantages in terms of finding and evaluating freelance talent – it has the added benefit of mitigating the risk of contractor misclassification. With the right co-employment partner, you can make the hiring process simpler, sidestep any confusion about W-2 and 1099 designations and avoid putting your company’s financials – and your own reputation – on the line.

Interest to learn more about how PeopleCaddie can help mitigate misclassification risk? Contact us!

sgruenMitigating Co-Employment, Misclassification Risk for Independent Contractors
Pay Day

How Contractors Can Get Paid Every Two Weeks

There was a time when you couldn’t hold a conversation about freelance work without a few key phrases popping up: “side hustle”, “supplementary income” and “temp work” come to mind. If you’re a full-time independent contractor, you’ve likely received your share of confused looks and worried glances from friends and family, along with some version of the usual question: “Wait, you want to do this?” Much the trepidation comes from the inconsistency of payment. Contractors are treated like vendors and have to wait on payment. But there’s an alternative wherein they enjoy the same, steady payment cycle as W-2 employees, and PeopleCaddie has developed a framework for how contractors can get paid every two weeks.

Our concept of contract work has changed dramatically in recent years. We’re now living in a freelance world, with an estimated 1.1 billion independent contractors making up more than a third of the global workforce – and it’s growing. As more workers in the U.S. and around the world embrace the gig economy, they aren’t blind to its pitfalls. Yet, even those are changing.

At PeopleCaddie, we aren’t just a staffing agency that sends our clients a bunch of resumes – we’re a conduit connecting independent contractors with the right companies and offering a no-hassle alternative to the traditional grind of gig work. The way we see it, it’s our business to provide contractors with all the benefits of freelancing while reducing or eliminating their most aching pain points.

Consider the typical freelancer-client transaction from the contractor’s perspective:

  • Create a vendor profile for every client, filling out and tracking paperwork each time a project begins with a new client
  • Submit an invoice for each project completed
  • Wait for confirmation from a client’s accounting department, sometimes trading emails or phone calls to ensure that an invoice is being processed
  • Often wait another 30-60 days for a check to be sent, as many companies follow a Net-60 policy for contractor payments
  • Gather documents from multiple clients for tax purposes at the end of every year

Paperwork will never not be a pain for freelancers, but PeopleCaddie significantly eases the usual frustrations by handling much of the heavy lifting for contractors. All transactions (and thus all paperwork) funneled through one central office, which is how contractors can get paid every two weeks. The advantage of receiving a steady, paycheck (direct deposit) – no matter when the client pays – is an enormous benefit.

And contractors aren’t the only beneficiaries. In addition to offering companies access to a wide network of skilled professionals, PeopleCaddie’s talent cloud helps them maintain their client-vendor relationships – often reconnecting the two parties – which helps businesses manage fluctuating labor needs, reduce training costs and time, and lighten the administrative burden by cutting down on the overall number of vendors used.

There are good reasons more workers are choosing to freelance: flexibility, variety, opportunity. Skip the commute. Work from home, in your space, at your own pace. See the world, working for nine months and traveling for three. Or cross borders through the work, signing on with bucket-list clients who would have been impossible to reach if not for the freelance economy. Even if your motivation for contract work is at a nuts-and-bolts level, a gig worker has inherent abilities that, collectively, feel like a superpower: find more opportunities while avoiding project burnout and diversifying an employment portfolio to optimize job security.

PeopleCaddie is glad to help contractors meet those goals. By teaming up with skilled vendors and working with good companies, we’re able to help freelancers take full advantage of an increasingly preferred freelance economy, achieve a healthy work-life balance and avoid many of the usual pitfalls and inconveniences of contract work.

Interested in a project on our jobs page? Contact us at payroll@peoplecaddie.com.

sgruenHow Contractors Can Get Paid Every Two Weeks