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Contingent Workers Training for Supervisors: Part IV Reviewed May 2013

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Title: Contingent Workers Training for Supervisors: Part IV Reviewed May 2013


1
Contingent Workers Training for Supervisors Part
IVReviewed May 2013
2
Introduction
  • Employers use various types of workers to
    perform the services they require. Most of these
    workers are classified as employees. Other types
    of workers are non-employees or contingent
    workers, such as temporary staffing agency
    employees and independent contractors. Correct
    classification of workers as employees or
    contingent staff has always been an important
    employer responsibility. It was not until the
    landmark Microsoft class action lawsuit, however,
    over a decade ago that employers became acutely
    aware of the costs of misclassification and the
    tax, the Employee Retirement Income Security Act
    (ERISA), employment law, and civil lawsuit
    consequences. To avoid these costly errors,
    employers need to train new and retrain current
    supervisors on the use of contingent workers.
  • These sample presentations on contingent workers
    are structured to be given in three sessions and
    are organized into six parts. The first session
    (Parts 1-3) includes the definition and types of
    contingent workers and covers leased employees,
    temporary staffing agency employees and
    co-employment. The second session (Part 4)
    pertains to independent contractors. The third
    session (Part 5) covers interns and includes Part
    6 which is a Quiz. The sessions are intended for
    presentation to supervisors and other individuals
    who hire and manage workers. They are designed
    to be presented by an individual who has
    comprehensive knowledge of contingent workers and
    relevant employment laws. These sample
    presentations must be customized to include
    state laws and the employers own policies and
    practices.

3
Presentation Contents
  • This training session is the fourth part of our
    five-part series on Contingent Workers. It is
    Part 4 Independent Contractors.

4
Objectives
  • At the close of this session, you will be able
    to
  • State the definition of an independent contractor
  • Cite the three IRS primary categories for a
    worker to be classified as an independent
    contractor
  • Describe elements of the three categories

5
Definition of Independent Contractor
  • An independent contractor is defined as a
    self-employed individual who performs a service
    for an employer under an express or implied
    agreement and who is not subject to the
    employer's control, or right to control,
    regarding the method and means in which the
    service is performed.

6
IRS Primary Categories for a Worker to be
classified as an Independent Contractor
  • The three IRS primary categories are
  • Behavioral Control
  • Financial Control
  • Type of Relationship

7
Category 1 Behavioral Control
  • The less control the employer has over the
    workers behavior, the more likely it is that the
    worker would be considered an independent
    contractor.
  • The more control the employer has over the
    workers behavior, the more likely it is that the
    worker would be considered an employee.

8
Category 1 Behavioral Control (contd)
  • If the employer
  • directs and controls how the worker performs the
    work
  • has the right to control the details of the
    workers performance
  • and provides training to the worker on how to
    perform the work
  • the more likely it is that the worker ought to be
    classified as an
  • employee and not an independent contractor.

9
Category 2 - Financial Control
  • Financial control pertains to the degree to which
    the employer has the right to control the
    business aspects of the workers job.
  • Factors that are considered in establishing
    whether the worker is an independent contractor
    or an employee are
  • Profit made or loss incurred by the worker If a
    profit may be made or a loss incurred, the worker
    is more likely an independent contractor if not,
    the worker is more likely an employee.

10
Category 2 - Financial Control (contd)
  • Additional factors that are considered in
    establishing whether the worker is an independent
    contractor or an employee are
  • Business expenses If business expenses are not
    reimbursed, the worker is more likely an
    independent contractor if business expenses are
    reimbursed, the worker is more likely an
    employee.
  • Personal investment in the work If the worker
    provides his/her own equipment and supplies, for
    example, the worker is more likely an independent
    contractor if not, the worker is more likely an
    employee.

11
Category 2 - Financial Control (contd)
  • Additional factors that are considered in
    establishing whether the worker is an independent
    contractor or an employee are
  • Availability of services of the worker to the
    relevant market If the services are available
    to the relevant market, the worker is more likely
    to be an independent contractor if not, the
    worker is more likely to be an employee.
  • Method of payment An independent contractor is
    paid (usually through accounts payable) with no
    employment or other taxes deducted and is
    provided a Form 1099 at year end. An employee is
    paid (through payroll accounts), has employment
    and other taxes withheld and is provided a W-2
    Form at year end.

12
Category 3 Type of Relationship
  • Factors to be considered regarding type of
    relationship between the employer and the worker
    are
  • Written contracts Employers usually enter into
    written contracts with independent contractors
    but not with employees with the exception of
    high-level executives.
  • Benefits Benefits, such as health insurance,
    paid leave, retirement plans are not provided to
    independent contractors but are frequently given
    to employees.

13
Category 3 Type of Relationship (contd)
  • Additional factors to be considered regarding
    type of relationship between the employer and the
    worker are
  • On-going working relationship If the work is
    expected to be completed at the conclusion of a
    project or period of time, it is likely that the
    worker is an independent contractor. If there is
    an expectation that the work will exist on an
    ongoing basis, it is likely that the worker is an
    employee.

14
Questions ? Comments ?
15
Summary
  • An independent contractor is a self-employed
    individual who performs a service for an employer
    under an express or implied agreement and who is
    not subject to the employer's control, or right
    to control, regarding the method and means in
    which the service is performed.
  • The three primary IRS categories for determining
    classification of a worker as an independent
    contractor are behavior control, financial
    control and type of relationship.

16
Summary (Contd)
  • Behavior control relates to the extent the
    employer directs and controls how the worker
    performs the work and whether the employer
    provides training on how to perform the work.
  • Financial control pertains to whether the
    employer controls the business aspects of the
    workers job.
  • Type of relationship focuses on whether there is
    a contract between the employer and the worker,
    whether benefits are provided, and if there is an
    expectation of an on-going working relationship.

17
Course Evaluation
  • Please be sure to complete and leave the
    evaluation sheet you received with your handouts.
  • Thank you for your attention and interest!
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