Hire Your First Employee. Rhonda Abrams

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      chapter

      3

      Understanding Employee Status

       “Always treat your employees exactly as you want them to treat your best customers.”

       —STEPHEN R COVEY

      Once you’ve decided to hire, you’ll need at least a basic understanding of the many laws affecting how you, as an employer, treat the people who work for you. In the next few chapters, you’ll learn about the basics of employment and labor law, payroll taxes, and ways to manage your payroll. But first you need to be aware of how the law deals with the day-to-day status and treatment of your employees.

Determining Your Worker’s Status

      You’re ready to hire someone, and they’re going to be your employee, right? Well, yes, but how do you classify that worker? You can hire them as an employee or independent contractor, for instance—but laws regulate your choice. As an employee, they might be covered by overtime and minimum wage laws or they might not. You might give them a contract or you might hire them in such a way that you can fire them whenever you need or want.

      All of this matters, so you need to know the basics of what determines a worker’s legal employment status. An employee’s status in the eyes of the government helps determine how much control over a worker you have, how much you have to pay them and for what, what rights they have, how much tax you have to pay, and more.

      When determining your employee’s status—in the eyes of the law, the major categories are:

       Employee or Independent Contractor

      Your business is growing—or you want it to grow—so you’ve got to get help. One of the first things you’ll have to figure out is whether the person you hire will be an:

      Few areas of tax law are murkier than—or can get a business in as much trouble as—the laws relating to classifying workers as employees versus independent contractors. The IRS and labor agencies aggressively pursue companies that intentionally—or unintentionally—classify someone as an independent contractor yet treat them as an employee. The IRS has gone after huge corporations as well as small businesses, and once they find a violation, they’re likely to go back through many past years of your taxes. So be careful.

      Many companies would prefer to classify workers as independent contractors rather than employees. Here’s why:

      And some workers would rather be classified as independent contractors. Here’s why:

      While classifying workers as independent contractors may benefit you financially, even if both you and the worker agree to such classification, employment laws limit that choice. So it’s important to understand the basic outline of what makes an employee an employee and under which circumstances you can classify them as an independent contractor.

       Criteria for employee vs. independent contractor

      In a nutshell, the question of who “controls” the worker determines that worker’s status. The more control you have over the worker—such as when, where and how they work—the more СКАЧАТЬ