Suppose you work in the HR department of a company that wants to hire production workers as independent contractors. What advice would you give management about this idea

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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2. Suppose you work in the HR department of a company that wants to hire production workers as independent contractors. What advice would you give management about this idea?
company
contos
vears,
The company can tell the contractor what criteria the finished assignment should
meet but not, for example, where or what hours to work. This distinction is significant,
deral law, if the company treats the contractor as an employee, the
11 of 35
HR How To
Using Temporary Employees and Contractors
When a company lands a big order, Providing the workers with sup-
needs to catch up on administrative
work, or isn't sure demand will con-
plies or tools and reimbursing
the workers for the expenses
to decide. The way to do this
is to file a Form SS-8 requesting a
determination from the IRS.
The form is available at the IRS
website (http://www.irs.gov).
associated with their work tend
to be signs that the workers are
employees.
• Providing the workers with ben-
ents such as insurance and paid
vacation time is a sign that the
workers are employees. Usu-
ally, temporary workers receive
these
tinue at present levels, contingent
workers look like the ideal solution.
The company can hire workers from
a temp agency or negotiate con-
tracts for short-term projects, and
Questions
1. Suppose a small company
does not want the headaches
when the project ends or demand
falls, the company doesn't have to
figure
ers, In addition, the company may
t what to do with the work-
of administering benefits
programs, so it hires its
workers from a temp ager
and keeps them on for several
Would you expect the
IRS to agree that these are not
employees? Why or why not?
2. Suppose you work in t
department of a
that wants to hire production
workers as independent
contractors. What advice
would you give management
about this idea?
out
benefits from an
that employs them, not from the
company that pays the agency
agency
be able to save money because it
doesn't have to provide employee
benefits
tract workers' pay.
However, it is not up to the com-
pany to decide whether
are really independent contractors.
The Internal Revenue Service has
guidelines for what constitutes an
employee and an independent con-
tractor. Here are some tips for how
to classify workers:
or withhold taxes from con-
for the workers' services.
• Ifa company hires workers from
temp agency to do work for
long period of time,
at
its
workers
a
the HR
what these workers do,
contr
and uses them to perform key
roles, the government may see
the company as an employer
or "joint employer" with the
temp agency. A company that
is a joint employer has to fol-
low labor laws, including those
against discrimination (see
Chapter 3) and legal require-
ments for pay (see Chapter 12).
• Ifa company is not sure whether
its workers are employees or in-
dependent contractors, it should
get professional advice. Compa-
nies and workers may ask the IRS
• Companies can specify what
they want a contractor to ac-
complish. But if the employer
tells the workers how to do the
Sources: Internal Revenue Service, "In-
dependent Contractor vs. Employee,
Tax Topic 762, last updated March 20,
2014, http://www.irs.gov; Internal Revenue
Service, "Independent Contractor (Self-
Employed) or Employee?" last updated
November 5, 2013, http://www.irs.gov:
"Hiring Temporary Employees," Entrepre-
neur, February 25, 2013, http://www
entrepreneur.com.
work and controls the workers'
activities, then the workers are
employees, not independent
contractors.
company has certain legal obligations, described in Part 4, related to matters such as
overtime pay and withholding taxes.
When an organization wants to consider using independent contractors as a way to
expand its labor force temporarily, human resource professionals can help by alerting the
company to the need to verify that the arrangement will meet the legal requirements. A
good place to start is with the advice to small businesses at the Internal Revenue Service
website (www.irs.gov); search for "independent contractor" to find links to information
and guidance. In addition, the organization may need to obtain professional legal advice.
Outsourcing Instead of using a temporary or contract employee to fill a single
job, an organization might want a broader set of services. Contracting with another
142
Transcribed Image Text:company contos vears, The company can tell the contractor what criteria the finished assignment should meet but not, for example, where or what hours to work. This distinction is significant, deral law, if the company treats the contractor as an employee, the 11 of 35 HR How To Using Temporary Employees and Contractors When a company lands a big order, Providing the workers with sup- needs to catch up on administrative work, or isn't sure demand will con- plies or tools and reimbursing the workers for the expenses to decide. The way to do this is to file a Form SS-8 requesting a determination from the IRS. The form is available at the IRS website (http://www.irs.gov). associated with their work tend to be signs that the workers are employees. • Providing the workers with ben- ents such as insurance and paid vacation time is a sign that the workers are employees. Usu- ally, temporary workers receive these tinue at present levels, contingent workers look like the ideal solution. The company can hire workers from a temp agency or negotiate con- tracts for short-term projects, and Questions 1. Suppose a small company does not want the headaches when the project ends or demand falls, the company doesn't have to figure ers, In addition, the company may t what to do with the work- of administering benefits programs, so it hires its workers from a temp ager and keeps them on for several Would you expect the IRS to agree that these are not employees? Why or why not? 2. Suppose you work in t department of a that wants to hire production workers as independent contractors. What advice would you give management about this idea? out benefits from an that employs them, not from the company that pays the agency agency be able to save money because it doesn't have to provide employee benefits tract workers' pay. However, it is not up to the com- pany to decide whether are really independent contractors. The Internal Revenue Service has guidelines for what constitutes an employee and an independent con- tractor. Here are some tips for how to classify workers: or withhold taxes from con- for the workers' services. • Ifa company hires workers from temp agency to do work for long period of time, at its workers a the HR what these workers do, contr and uses them to perform key roles, the government may see the company as an employer or "joint employer" with the temp agency. A company that is a joint employer has to fol- low labor laws, including those against discrimination (see Chapter 3) and legal require- ments for pay (see Chapter 12). • Ifa company is not sure whether its workers are employees or in- dependent contractors, it should get professional advice. Compa- nies and workers may ask the IRS • Companies can specify what they want a contractor to ac- complish. But if the employer tells the workers how to do the Sources: Internal Revenue Service, "In- dependent Contractor vs. Employee, Tax Topic 762, last updated March 20, 2014, http://www.irs.gov; Internal Revenue Service, "Independent Contractor (Self- Employed) or Employee?" last updated November 5, 2013, http://www.irs.gov: "Hiring Temporary Employees," Entrepre- neur, February 25, 2013, http://www entrepreneur.com. work and controls the workers' activities, then the workers are employees, not independent contractors. company has certain legal obligations, described in Part 4, related to matters such as overtime pay and withholding taxes. When an organization wants to consider using independent contractors as a way to expand its labor force temporarily, human resource professionals can help by alerting the company to the need to verify that the arrangement will meet the legal requirements. A good place to start is with the advice to small businesses at the Internal Revenue Service website (www.irs.gov); search for "independent contractor" to find links to information and guidance. In addition, the organization may need to obtain professional legal advice. Outsourcing Instead of using a temporary or contract employee to fill a single job, an organization might want a broader set of services. Contracting with another 142
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