In general, new people should be classified as employees unless:
- They are explicitly temporary (ex. a 3 month contract).
- They are hired to work on a single project, with a definitive end or deliverable.
- They are being paid for a specific results (like a deliverable), rather than for their time.
Contractors and employees perform fundamentally different functions. Check out this page on the IRS website for more information about the differences. If you have a contractor "misclassified" as an employee, your company could be liable for employment taxes and penalties from both the federal government and one or more state agencies.
Want to read more?
Check out this guest post by our friends at Priori Legal. Co-founder and CEO Basha Frost Rubin runs you through the differences in status and tax filings for employees and contractors, and how to ensure you’re following the law (and avoiding penalties!).
This material is intended as informational purposes only and not as advisement for hiring or legal purposes.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.