Know Your Workforce
Do you have contractors working in your organization, either in the country where you work, or perhaps at one of your other offices in another country? The fact is that most organizations are now engaging non-employee workers around the globe and each country does it differently, has different regulations and different terminology. There is much debate about how to correctly classify these non-employee workers and we are seeing more legal cases popping up (especially in the US, with the rest of the world soon to follow) and fines issued to companies that have classified their workers incorrectly.
In the USA, the IRS provides guidelines on their website about how to know if a worker should be classified as an employee or independent contractor. “If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes, fines and penalties for that worker.” (Refer Internal Revenue Code section 3509). You may also be held liable for violations of laws that apply to employees and this could subject your entire workforce to state or government workforce classification audit. For example an employer must pay taxes to cover employees under worker’s compensation insurance and unemployment insurance. There are payroll taxes due (not just in the US), social security and medicare taxes.
The guidelines in each country vary and some countries are stricter than others. Don’t know the laws in other countries? Don’t worry, CXC Global does, in the 65 plus countries we service. In the US, each state and territory has its own employment regulations. That’s 51 different sets of legal regulations you need to know if you want to engage contractors in the USA.
One of the key indicators about a worker’s classification is related to control. How much control, as a business, do you exert over the worker? Do you dictate the hours they work, what they will wear, what duties they perform, how they should behave? Is there financial control; for example, do you reimburse expenses?
Generally, someone is an employee if they perform services for your business and you control what and how the work is being done. As an employer, the key element of an employer-employee relationship, is your right to control the elements of how the service is carried out. There are benefits to being engaged as an employee as there are to being engaged as an independent contractor. There are benefits both ways to businesses as well, but there is a framework established to govern these engagements and while this may change in the future, it’s in your best interest to remain within the framework.
Whether you have just one contractor or many, the same rules apply. However, if you’re a global business and engage workers in multiple countries, it can get a little tricky.
What You Should Do
Our advice? Do what Max did. Get smart. Take control, get compliant and remove any uncertainties or confusion about your global contingent workforce by partnering with a trusted advisor, who has solid experience in global classification and management of contractors. Better to be safe, avoid potential Chaos and not wind up in a ‘would you believe’ scenario.
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