On October 8 we posted an update from Sen. Karen Tallian about the state’s activity to reduce employer misclassification of workers. The article “Worker misclassification costs state big bucks” published on Sunday in The Times of Northwest Indiana (nwi.com) provides a nice summary of how employers are to make the correct determination:
For your information
The Internal Revenue Service suggests employers determine whether a worker should be classified as an employee or an independent contractor based on a worker’s genuine independence from the employer.
In general, the more control an employer has over the worker, the more likely it is that worker should be paid as an employee and not an independent contractor.
The IRS recommends employers use the following questions to determine their level of control over their workers:
Does the company control or have the right to control what the worker does and how the worker does his or her job?
Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Update: For more information on this topic, download the November 2010 NCSL Legisbrief on Employee Misclassification (PDF).