The social and political climate has largely dictated peaks and valleys with government enforcement on the use of INDEPENDENT CONTRACTORS (ICs). Even when you think you have properly navigated through the maze to achieve compliance, you can never be certain that you achieved that “silver bullet”.
Using ICs can save 40% to 50% to their bottom line. Some of the savings would include Social Security Taxes, Federal and State Unemployment Insurance Taxes, Workers Compensation, employee benefit programs, and non-reimbursed expenses, just to name a few. Plus, companies need not comply with the wage and hour laws and other complicated laws that would be typical with employee models.
Utilizing independent contractors often leads to greater output versus using hourly employees as well as greater compensation to the independent contractor. Therefore, using independent contractors vs employees often leads to a WIN /WIN for both parties concerned. So, ask yourself the question: is the RISK worth the REWARD?
While there may be no certainty to the “silver bullet”, companies must figure out how they can MITIGATE the RISK and by so doing maximizing its REWARDS. They must first understand the laws that govern the use of independent contractors; not only Federal and State statutes but also case law which is constantly evolving. One needs to understand the statutory provisions of the law and the out birth of these laws that have impacted published case law. And then and only then can one begin the process of compliance. Your independent contractor model can take on various shapes and forms which largely depends on your business vertical (s).
The goal when dealing with compliance as previously mentioned is mitigating risk and this involves both FORM and SUBSTANCE. The FORM part has to do with written contracts and related documents. The SUBSTANCE part must closely resemble the FORM part. So, if you have an Independent Contractor Agreement it should closely match how the parties interact with one another. If the FORM lacks content or is ambiguous to support the SUBSTANCE and if your IC model is challenged, the FORM can easily lead to an adverse ruling even though in SUBSTANCE, the parties are interacting like an independent contractor relationship should interact. Consistency is one of the most important key factors in mitigating risk.
The best way to determine whether your company is compliant is through a Best Practices review. Having an outside company visit your location(s) and interview your staff, review your operations, and even interview willing ICs goes a long way in finding ways to save your future self from headaches. An outside point of view is crucial as we look at your business the way a government agency would thus providing an advantage to your business.
The biggest question is: Does your business model meet the criteria of the government and the states that your company operates in?
For more information and guidance, go to www.consultechclaims.com or call 518-689-2470 x140
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