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The Profile of a Typical Independent
Contractor/1099 Employee
Over the last few weeks I have received email messages and telephone
calls from various friends and clients asking about who is and
who is not eligible to be classified as an Independent Contractor/1099
employee. There is a lot of misunderstanding about this issue
among many small business employers. Both the U.S. Department
of Labor (DOL) as well as the IRS have developed a series of
tests to help employers determine the correct answer. It can
all be very confusing, so I have taken both sets of tests and
developed my own listing of criteria which are listed below.
Hopefully this will help to clear up some of the questions and
confusion. In order for an individual to be legally classified
as an Independent Contractor/1099 employee, the individual must
be:
In business for him/herself and has/does the following:
A company’s best defense against the potential expense
and aggravation related to federal or state law violations is
to proactively review and revise as needed all Human Resources
policies, handbooks, hiring procedures, compensation, benefits,
training programs, communications tools and other functions.
The professionals of PHHR are ready to assist your organization
with this type of training as well as to maintain compliance
with the latest state and federal mandates.
In business for him/herself and has/does the following:
- The individual has business cards, marketing materials, and
website/Facebook/LinkedIn.
- Needs no instruction on how, when or
where to do the work.
- Can hire assistants to do the work if needed.
- Is incorporated;
has city/county business licenses.
- Pays own business taxes, furnishing,
travel and equipment expenses.
- Membership in business/community
organizations.
- Has Liability Insurance.
- Has an established office with needed
tools/materials/supplies/computer.
- Makes services available to
the general market and works for a variety of businesses and
organizations. The contractor/client relationship ends when
the contracted job is finished
- Submits contracts which detail the
work to be accomplished along with time lines for completion.
- Is
only paid when the contract is completed. (Payment by the hour
indicates an employee/employer relationship.)
- Works at his/her
desired time and location using his/her own methods and materials.
He/she never clocks in/out for an employer.
- Has the very real
possibility of making a profit or incurring a loss for all
work performed. Success or failure depends on the relationship
of receipts to expenses. Jobs are contracted for and prices
agreed to in advance with no guarantee of success.
- Has a real and significant
investment in tools, equipment, supplies, computers, etc in
order to run the company.
Anything short of this is an EMPLOYEE.
A company’s best defense against
the potential expense and aggravation related to federal or state
law violations is to proactively review and revise as needed
all Human Resources policies, handbooks, hiring procedures, compensation,
benefits, training programs, communications tools and other functions.
The professionals of PHHR are ready to assist your organization
with this type of training as well as to maintain compliance
with the latest state and federal mandates.
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