Many company owners want temporary labour for a variety of short-term initiatives, and there are more competent individuals available than ever before. Some are retired, some choose to work for themselves, and still others come to you via temporary agencies – all of them have considerable talents that may be utilised to finish a project, address an issue with highly specialised skills, or cover gaps in your San Mateo company’s personnel.
The hourly or daily fee is determined by their abilities and whether they come via an agency or not. Their rates are often somewhat greater than what a salaried worker makes in the same function, but this is to compensate for the lack of security and benefits. If the worker comes to you via an agency, you will pay a margin on top of what the worker earns to cover the agency’s overhead costs. Access to temporary workers is the ability to swiftly staff up or down without incurring the expenses of acquiring and/or terminating people.
Now that we’ve covered the fundamentals, let’s look at what it takes to stay legal while hiring temporary labour.
1. Understand this: Temporary workers are not employees.
This is the most common method for businesses to get into difficulty with temporary workers: they abandon their initial objective and begin treating them like employees. A contract employee should not be subjected to the same scrutiny as a temporary worker:
There are no background checks.
There are no drug testing.
There are no performance evaluations.
Some people even advise against inviting temporary employees to workplace occasions.
When the line between contract employee and employee becomes blurred, the corporation is most likely guilty of misclassifying the temporary worker and may face fines with negative tax effects. The IRS finds temporary employees are misclassified 95 percent of the time in instances it examines
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2. Comply with the terms of the original temporary work contract.
Companies often become too reliant on their temporary employees. The scope of the project expands, and since the temporary worker is the only one who knows how it works, they remain on longer than expected and begin to meld into the workplace. At business functions, they are awarded employee status, including increases and bonuses.
Engage your temporary staff for a particular purpose and a short time period, and ensure that the project is completed on schedule. After a little hiatus, you may easily establish a new project and hire the same temporary worker under new conditions. If a temporary employee is too precious to lose, recruit him or her instead as an employee.
3. Understand What the IRS Considers an Employee
Hiring using an agency reduces your risk somewhat since the agency acts as the employer, managing tax payments, increases, and benefits. When you employ a temporary worker directly, you run a somewhat higher risk, but frequently at a lower cost. In any scenario, understanding what the IRS considers an employee is beneficial.
To evaluate if the IRS would consider your temporary worker to be an employee, consider the following:
Does the temporary work full-time or part-time hours?
Is your firm the only source of revenue for temporary workers?
Does your temporary employment take place on-site or flexibly on- and off-site?
Do you offer temporary workers with equipment?
Do you make advantage of the equipment provided by the temporary workers?
How much influence do you have over the temporary worker in general?
When deciding whether a temporary worker has been misclassified, the IRS will examine the following questions. If they rule against you, you may be obligated to pay back taxes and benefits.
4. Think about the possibility of a lawsuit.
When it comes to the status of temporary workers vs employees, a company owner must be concerned about more than just the IRS. Ex-temporary employees are increasingly suing prior employers for:
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Many of you are aware of the $97 million settlement in favour of misclassified employees in a class action lawsuit involving 10,000 temporary workers and Microsoft. Long-term contract labourers collaborated alongside Microsoft employees who, in some circumstances, earned billionaires as a result of the value of their stock options. Workers sought for equal pay and were awarded it retrospectively.
Regardless, it’s critical to aggressively differentiate between employees and temporary workers since misclassification has the ability to ruin your business.