In AXIOM Updates, News

State regulations on consultant classification becomes more stringent each year, as does the IRS.  Are you and your vendors updated on the latest classification guidelines? As we enter 2018, now is a good time to assure compliance with your industry classification guidelines.

The growing and ongoing concern is too many firms are using consultants who are classified as independent 1099’s in roles where they should be considered an employee of the vendor you’re working with.

AXIOM, with 15 years’ experience in learning and development staff augmentation, invests significantly in classification regulations.  The bottom line is, if not properly classified, the contingent workforce can be considered your – not your vendor’s – employees, opening yourself up to potential fines, penalties and a possible PR nightmare.

If you partner with a vendor that misclassifies contingent workers, you, as the company that hired the vendor, can face repercussions. If the vendor you hire for staff augmentation needs misclassifies a worker as an independent contractor (called a 1099), you risk increased tax bills and penalties due to your vendor not paying the appropriate employee taxes. You can also be penalized if your vendor does not use correct forms to verify IRS regulations and  insurances .

Often the vendor doesn’t verify if the consultant holds the correct, legal paperwork and insurances to be an independent contractor. Along with your vendor, you may also be subject to penalties for failing to take appropriate state withholding and deductions, plus levies for not making contributions to state disability and unemployment agencies. Also, due to the Fair Labor Standards Act (FLSA), employers may potentially be liable for unpaid overtime for any misclassified workers. It’s paramount that organizations have an understanding of the business relationship between themselves, the vendors they hire, and the workers that vendor provides.

While the contingent workforce continues to grow, organizations and vendors alike need to be aware of laws governing the hiring of contractors. Keep yourself and your workers safe in this growing gig economy by finding a trusted outsourced provider that is educated on IRS requirements and providing a safe and legal working environment for your staff.

-L&D thoughts
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