Are your staff employees or independent contractors? If you are the staff member, do you know if you are an employee or independent contractor? While the distinction may seem small, the difference could have a variety of consequences.
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In Michigan, we follow the federal 20-factor test to determine if a person is an employee or independent contractor.
The requirements can vary from state to state.
When deciding if a person is an employee or independent contractor, it is essential to look at the factors. The factors include, but are not limited to, the following:
- Instructions regarding work
- Training provided
- Continuing relationship
- Full time requirement
- Payment intervals
- Payment of expenses
- Furnishing of tools and materials
- Working for multiple businesses
- Making services available to the public
As you can see from the examples above, the factors largely fall into three categories:
- Behavioral control
- Financial control
- Relationship of parties
Employers must weigh all 20 of the factors when determining whether a person is an employee or an independent contractor.
One of the major differences for an employer is how taxes are handled for the person. Employee’s wages are subject to state unemployment tax and that person may be eligible for unemployment benefits. Independent contractors are not covered employment and the employer does not pay unemployment taxes.
If you aren’t sure what is more accurate and beneficial for your place of business, contact Rickard & Associates today. We can help you determine whether personnel are employees or independent contractors.
It is important to document the reasons why someone is an employee or independent contractor.
If you need help with your employee handbook, employment agreements, or independent contractor agreements, contact Rickard & Associates today!
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