Worker misclassification is the process of labeling workers as independent contractors instead of employees and vice versa. Employee misclassification may result in a lot of legal consequences for your company. However, misclassification is a common mistake in many companies’ hiring processes.
But how can you eliminate worker misclassification in your hiring process? Below are some tips to guide you.
Create a Process of Evaluating Employee Clarification Status
Establishing a process for evaluating workers’ clarification status can be cumbersome. However, this is one of the most efficient ways to ensure compliance for both current and future employees. You should use a formal assessment which includes a cognitive assessment test process during the onboarding of a new employee or an independent contractor.
You should also ensure compliance by regularly checking workers’ roles to confirm they haven’t changed. Remember to document your process in case of an employee lawsuit or a government audit.
Know the Difference
You should also ensure compliance by regularly checking workers’ roles to confirm they haven’t changed. Some factors to consider when differentiating between the two groups of workers include:
- The special skills of the workers
- Ownership of equipment and tools
- The engagement or contract’s length
- The worker’s opportunity for loss or profits
- The degree of behavioral and financial control
- Whether the work they will do is integral for the company or not
There are also numerous tests online to help you better classify your new workers.
Manage Independent Contractors and Employees Differently
Under the law, your contingent workforce and employees aren’t the same. Therefore, they should be managed and treated differently. Ensure there is a clear and distinctive difference in the way you handle and manage these two types of workers.
Don’t give your independent contractors the same incentives and perks you give your employees. Don’t give your contingent workers benefits such as health coverage, and don’t pay them the exact amount you pay your permanent employees. Also, don’t give them a job description, but instead, provide them with a list of deliverables and work tasks.
Moreover, do not provide equipment and tools to handle the job or exhibit any type of behavioral control for your contingent workforce. Failure to do this may lead to contractor misclassification.
Consider Using a Staffing Agency
Another great way to reduce the risk of employee misclassification is to hire your workers using a staffing agency. Using a third-party company means shifting a significant part of risk into the staffing company. The agency will also provide you with back office support to help you with the hiring process.
But ensure you use a reputable and high-quality agency. That’s because your business could still be seen as a joint employer, and hiring a reputable company is essential for compliance liability.
Avoid Worker Misclassification by Using the Above Tips
Worker misclassification may result in misclassification penalties, costly fines, back taxes, lawsuits, interest fees, and jail time. The cost of employee misclassification may lead to millions of losses, and it’s best not to risk it. Following the above tips will ensure you eliminate the risk of employee misclassification.
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