Advancements in technology are optimizing every function within an organization. From groundbreaking BI capabilities to automation at every level, there’s no turning back from the infiltration of technology in everyday business processes. To keep up to speed with these advancements, many organizations are turning to IT contractors to bolster their teams with the technical knowledge needed to take these initiatives to the next level. If there’s one topic we discuss with organizations looking for IT contractors on the daily it’s compliance – and for good reason.
There are a few key ways organizations can reap the benefits of IT contractors while ensuring they’re compliant with the latest employment laws. Check it out.
Ensure your contractor is properly classified
Storytime. Once upon a time, an organization hired contractors to work alongside their permanent employees. The contractors were performing virtually the same role as their counterparts, sitting in the same cubicles, and reporting to work at the same time. However, there was one stark difference – they weren’t receiving any of the benefits. The organization was able to skirt past providing company-sponsored health benefits, PTO, overtime, and more, simply because the contractors were classified as “temporary”, some for upwards of two years. The organization thought they could skirt past it, at least. If this story sounds familiar, it’s because the organization was Microsoft. One class-action lawsuit later and they had to pay a whopping $97 million to the contractors they had slighted over the years. A devastating sum, even for a tech giant like them.
Microsoft’s highly publicized loss was a major wake up call to organizations across the country and the IRS has been on high-alert for employee misclassifications ever since. It’s a warning to businesses that you can’t have two employees with the exact same functions, expectations, and working relationship but classify them differently. So, where is the line drawn? Keep reading.
Understand the boundaries
Once you classify a worker as a contractor, there are boundaries that you must operate within to stay compliant. The IRS strives to make these boundaries clear (they attempt to, at least) with their three-factor review that uses common law to determine if a worker should be classified as an employee instead of a contractor. We explored this idea when we discussed why limiting contract lengths wasn’t an effective safeguard against coemployment, but it’s important to revisit in this context. If you’ve ever worked with contractors, how would you respond to the questions below?
- First, the IRS reviews the level of behavioral control the business has over the worker. Does the business have the right to control what the worker does and when they report to work? Can the business itself take corrective action against the worker?
- Next, they look at the level of financial control. This factor is a little more cut and dry. Is the worker paid on the same pay schedule as permanent employees? Does the company expense business-related expenses and provide tools to do the job?
- Finally, they look at the relationship between both parties. Is the working relationship between a worker and their supervisor likely to continue even after a project is complete? Does the business have the right to discharge the worker at will?
If the IRS finds that the answer is “yes” to these questions, then a business’s workers likely classify as employees and not contractors. Even with honest intentions, the misclassification of workers can have serious bottom-line implications.
Partner with an IT staffing provider
To reap the benefits that IT contractors provide without having to navigate employment laws alone, many businesses are enlisting the help of staffing providers. Staffing firms that specialize in IT talent, like TriCom Technical Services, aren’t just technical recruiting experts. We have years of experience navigating complex employment laws ensuring that our clients can focus solely on taking their businesses to the next level.
For example, when one of our IT contractors joins your team, we take full legal responsibility of payroll, timecards, management, and assignment changes. It’s our business to know the ins and outs of employer compliance, and we’ll work closely with you to ensure there are no potential coemployment issues or other infractions. Plus, all of our contractors receive industry leading benefits through us – like no-cost health insurance, PTO, and even 401K matching. With TriCom, it really is that simple.
So, go ahead. Think big. Hit “go” on bringing new technology into your organization. We’re ready to connect you with the IT contractors who will turn your wish list initiatives into a reality. Let’s talk.