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Avoid misclassification of contractors and employees

Most businesses in Houston, Texas, need to hire people to perform essential functions for the company. In some cases, the roles may be filled by either employees or independent contractors. Even though the employer has a certain amount of leeway in deciding which to choose, the Houston Chronicle points out that the federal government is attempting to create more limitations on when a worker can be classified as a contractor.

Employers do not have to pay for workers’ compensation or unemployment insurance when they hire independent contractors, although they do for employees. They must also withhold taxes from employee wages. Because there can be serious legal ramifications for companies who treat employees as contractors, SCORE explains there are steps a company can take to lessen the risk of litigation or audits.

Since contractors are not employees, it makes sense to treat them differently. Employers are advised not to offer benefits such as paid leave. Unlike employees, contractors keep their own records, pay their own taxes and have their own payroll. They also have control over how they perform the work they are hired to do. Consequently, companies should expect them to maintain their own purchasing records, as well.

Independent contractors often work for more than one company at a time. Employers should make it clear that they do not have a monopoly on a contractor’s services, and they do not expect loyalty such as they might from an employee. A contract may state specifically that the person providing services is an independent contractor, but it does not guarantee the classification. Still, the terms of the contract can be helpful in identifying the relationship. 

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