You want to be a great boss – the kind that’s beloved by their workers, yet also runs a brisk business. Part of being that boss means knowing how to classify your employees in a legal sense. That’s where things can get complicated.
The mistakes employers make
Misclassifying employees is a common mistake made by small business owners. Sometimes, the employees are misclassified as exempt. You must be sure that non-exempt employees are paid for all hours worked. They must also receive overtime pay whenever they work more than 40 hours per week
Other times, employees are misclassified as independent contractors. This may be done in a deliberate attempt by the employer to cut costs, but can end up backfiring on both employer and worker.
Employee or independent contractor?
To answer the question “are your workers employees or independent contractors?” depends on your business relationship with them. Their job title – and even a signed agreement – may not matter in the end. There is no one right way to answer the question, but consider these important factors:
- Is the work performed integral to your business?
- Is the worker paid individually, or does the payment go to their own business?
- Do they invoice you?
- Do they have other clients besides you?
- Do they hire assistants or helpers?
- Do they use their own tools and equipment?
- Do they or you set the pay amounts and working hours?
The majority of the time, most workers can be classified as employees. The most important question to ask yourself when coming to this decision is, “Is the worker in business for themselves, or are they financially dependent on your business?”
Get help for other complicated small business matters. If you have any other questions or concerns about legal issues for your small business, contact Dana Ball Legal Services today.