Tips for business owners to avoid misclassifying workers

– Don’t assume you know the answer. Consult a tax professional and an attorney to ensure you are square with Internal Revenue Service and labor laws when hiring staff or contractors. The federal government examines the amount of control – financial and behavioral – when determining whether your workers must be considered employees.

– When contracting with a staffing company or labor broker, make sure it’s properly classifying its workers as employees. Labor officials have started to hold the companies that hire contractors who violate labor laws responsible for the violations as well.

– If you want to ensure your company is on the up and up with the IRS, file a SS-8 form and ask the agency to determine whether your worker is an employee or independent contractor. Know this: The vast majority of the time, the IRS determines the worker should be an employee.

– Remember, using contractors can be a double-edged sword. They set their schedules and pricing and perform the work as they see fit. If you care about when and how the work is completed, you need to hire an employee, not a contractor.

– If you hire a subcontractor, check his workers’ compensation policy. Often, companies that treat their workers as independent contractors purchase minimum premium policies, otherwise known as “ghost policies,” that aren’t designed to cover known employees. The agent or insurer that sold the policy can describe it; the certificate looks just like those issued for fuller policies.

– Excuses that won’t fly with investigators: “He works only a few days a week” or “every once in a while.” “I told him and he agreed to be an independent contractor.” “I have him use his own tools.” “He’s been doing this work so long he doesn’t need my supervision.”