Why is proper worker classification important?

Today's workforce is more diverse than ever, not just in terms of worker characteristics, but also in terms of job roles and functions. For instance, in today's economy, fewer workers are employees; more are working in independent contracting or freelancing capabilities.

This is largely due to modern workplaces and the interests of younger workers who are actively driving the so-called gig economy. Whether you are someone working in this capacity or an employer looking to hire people, knowing the differences between the types of workers will be crucial.

How to classify workers

Employers must classify workers properly. This means identifying them as employees or something else, typically an independent contractor. This is a deliberate decision that depends on numerous factors, from the scope of work performed to the degree of control a worker has.

The Internal Revenue Service has this helpful article on how to decide whether a person is an employee or contractor. 

Why classification matters

Properly classifying workers is crucial for at least a few reasons.

  • It protects workers' wages and benefits. For instance, Albuquerque employers must provide certain protections for employees, but such protections do not usually extend to contractors. This could include workers' compensation insurance, job-protected leave and overtime pay.
  • It determines job expectations. Whether a person is an employee or contractor will determine a lot about the expectations of the role. It will typically establish to whom the person will report, the duration of employment and which party is responsible for paying taxes.
  • It prevents serious consequences. Properly classifying workers is vital to complying with state and federal laws. If an employer misclassifies a worker -- intentionally or not -- he or she could face serious penalties, including fines and back payments. An employer may also be named in a contentious lawsuit.

Understand that worker classification can be more complex and confusing than people think. And, considering the stakes of proper classification, it is vital not to leave this issue to chance. If you have any questions about worker classification, getting legally sound answers sooner, rather than later, is wise.

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