FAQs
To find answers to commonly asked questions regarding compliance issues, please browse through our FAQ's.
What is an independent contractor?
Independent contractors, also known as ICs or 1099s, are people who contract to perform services for others but don't have the legal status of employees. Independent contractors are engaged by companies to complete projects or deliverables according to an agreed scope of work. ICs are also referred to as self-employed, consultants, freelancers or business owners.
What are the benefits of engaging independent contractors?
Independent contractors can become strategic assets and competitive differentiators. Many legitimate independent contractors have unique subject matter expertise and specific project acumen that may be difficult to find in the talent marketplace.
Independent contractors often provide solutions to short-term, finite needs that are outside the scope of the company's core business functions. Engaging an expert IC for a specific project can provide flexibility and quicker results.
In addition to the talent acquisition benefits, utilizing ICs can often save money over hiring employees. Employers are required to pay federal payroll and social security taxes, state unemployment and workers' compensation insurance premiums and often offer benefits including health, vacation and sick time, retirement, and life and disability insurance. These expenses add at least 20 to 30 percent to payroll costs. This does not include the costs to provide office space and applicable equipment.
Lastly, engaging ICs instead of employees can reduce exposure to some types of lawsuits, such as those alleging job discrimination or wrongful termination.
What are the risks of hiring independent contractors?
The risks of engaging independent contractors are primarily associated with the improper classification of status. Penalties can include:
- Liability for back taxes, penalties and fines.
- Attorney costs for related litigation.
- Unwanted public scrutiny and publicity.
- Criminal sanctions including imprisonment and fines.
- Personal liability for corporate officers.
- Invalidation of benefit plans.
- Overtime pay.
- Reimbursement of retirement benefits.
- Reimbursement of medical coverage.
- Liability for the contracting party, for the actions of the reclassified worker. For example, harassment or injuries.
- Unemployment claims.
Reclassified workers can also file suit to obtain the right to stock options, participation in profit sharing programs, to receive disability pay, workers' compensation and so forth.
When is it safe to engage independent contractors?
A company's risk of reclassification is lowest when engaging in a business to business relationship with people who have a history of completing specialized project work for multiple companies. These people should be performing work that is different than that of the regular employees of the company. ICs earn their livelihoods from their own independent businesses, instead of depending upon an employer. A company should thoroughly review the financial relationship, behavioral structure and intent of the parties each time an IC is engaged on a project. Complete documentation should be collected and stored to justify the classification decision.
What tests are used to review a worker's classification during an audit?
One of the challenges to proper classification is that there are multiple legal tests used by various government agencies. Some examples include:
We have never been audited. Why should we be concerned now?
The short answer is: if you stay in business long enough, you will likely be audited. Audits are triggered by any number of events, including the sharing of information between government agencies. Arguably, one of the most common avenues is through an inaccurate unemployment claim. Additionally, agencies can be alerted through other claim types including workers' compensation, wrongful termination, and wage and hour discrimination. Financial exposure can grow exponentially through private right of action lawsuits.
What are the benefits of Secure Talent's Complete Payroll Services as a component of an overall risk mitigation strategy?
When Secure Talent renders a recommendation of "not qualified" after reviewing the worker and project specifics, clients may opt to hire the worker as a regular employee or use our Complete Payroll Services to retain the talent. Our payroll services are designed to deliver an employment package that is attractive to the worker and mitigates your risk. We provide a comprehensive program that includes:
- Employer-of-record services.
- Medical insurance (including Secure Talent contribution).
- Dental (including Secure Talent contribution).
- 401(k) plan.
- Workers' compensation and unemployment insurance.
- Financial services.
- Wellness benefits.
How is Secure Talent different than others in the marketplace?
- Experience.
Secure Talent was founded by industry experts dedicated to building exceptional solutions that serve our clients, our payrolled workers and independent contractors. We understand the complexities of attracting and retaining specialized talent while ensuring compliance with state and federal compliance regulations. We provide comprehensive risk mitigation services so that our clients can focus on their core business.
- Personal attention.
At Secure Talent, process automation is complemented with subject matter expertise. Our clients experience a personal touch through consistent service, communication and education. Our service delivery begins with a dedicated implementation and change management team, and extends through the life of our client partnerships.
- Flexibility.
We design a program to fit your needs and culture, while maintaining the highest standard of risk mitigation. The Secure Talent team will work to become an integrated part of your talent strategy.
- Protection.
Our processes and procedures have been engineered by experts to provide the highest degree of protection against employment misclassification and co-employment. We continually monitor and research industry news, legislation and regulatory activity to ensure that our clients are protected.
What and who is involved with launching Secure Talent's compliance and payroll services?
Secure Talent provides leadership and change management throughout each step of the implementation process. A team of dedicated project managers will work with you to define your specific requirements, build a process, close all loopholes, and educate and train your stakeholders. Typically, client participation includes minimal time investment from human resources, procurement and legal counsel. Within a few weeks, you can be on your way to engaging the talent you need without the worry of reclassification.