Considerations for Employee Classifications

In the construction industry, it’s common for businesses to employ workers of a variety of classifications. In a recent article for Construction Executive, Lariza Hebert discusses the benefits and drawbacks of including independent contractors in your workforce.

Independent contractors can be beneficial for a variety of reasons. For example, it is very useful to draw on independent contractors to cover short-term labor needs. Additionally, using independent contractors can reduce a company’s payroll and benefits costs because they don’t qualify for benefits and generally are liable for covering their own payroll taxes.

However, there are significant downsides to working with independent contractors. For example, companies that employ independent contractors are more closely scrutinized by state and government tax officials because of an industry history of misclassifying in order to save on taxes. Additionally, using independent contractors can leave your company open to costly private lawsuits regarding misclassification. Employers who are found to have misclassified their workers are liable for up to three years of back pay, as well as other damages.

So, how do you determine whether a worker is an employee or an independent contractor? Unfortunately, there is no single metric by which this is judged. Generally, however, the criteria include factors such as who controls the worker’s schedule, whether the worker is permanent or temporary, and more. Due to the prominence of legal issues surrounding this area in the construction industry, business owners should think carefully about how and if to employ independent contractors with their organization.

For more details, read the article in full at Construction Executive.