California’s AB5 law caught some employers (and independent contractors) off guard.
It was the first time many had given serious thought to employee misclassification, and how their business model would be affected by a change in definition or restriction. We watched Uber and Lyft fight in court to keep their drivers classified as independent contractors instead of employees.
There’s a good reason for all of us to pay attention.
We’re fast moving from W2 employees to 1099 contractors as a norm, without any signs of the trend slowing down. In the past decade, the use of independent contractors has increased by 40%, alone.
The kicker is that many are misclassified as such, which is why laws like AB5 have come with real penalties.
What’s your risk, if you misclassify an employee? What penalty are you facing? Is it possible with the growing move towards remote work that regulatory agencies will expand their oversight?
No matter what happens, we have good news! There’s an easy way to avoid employee misclassification. You can still get the benefits of W2 employment without taking on the financial or legal burden.
It’s a secret we’re going to let you in on…
What Is Employee Misclassification?
To start, let’s look at cold reality: 10 to 20% of employers misclassify at least one employee as an independent contractor and with remote work increasing rapidly, it too is on the rise.
In the United States, the IRS has specific definitions of an independent contractor and an employee. The financial, behavioral, and relational control a person has over those hired to work for them plays a key role.
True independent contractors have a say in their rate of pay, when and how they do their work, and what work they’ll take on. Their actions directly affect their own bottom line.
On the other hand, W2 employees receive instruction about what to do (and not to do), how and when they should do it, among other things.
Employee misclassification occurs sometimes by accident either through misunderstanding the classification guidelines, or because an independent contractor’s work and position has crept into the realm of employee without anyone realizing it.
Of course, employee misclassification also occurs because independent contractors cost less.
Those who hire them don’t have to pay the taxes and other benefits associated with a W2 employee. Uber and other similar companies may have relied so heavily on the contractor model that hiring their team as W2 employees will fundamentally change their business model and viability. But they are not the only companies profiteering by avoiding paying their teams the benefits they deserve.
Subscription Staffing Solves The Employee Misclassification Worry
Ever checked to see if your independent contractor(s) was still classified as such?
For instance, have you been working with a virtual or executive assistant (even through a virtual assistant company) on an ongoing basis giving them work relating to your main business? If so it will likely have caused a change in classification status.
Here’s where we let you in on the secret for peace of mind about all of that: use subscription staffing instead.
Subscription staffing doesn’t leave you shouldering responsibility.
They are in compliance through the remote staffing agency, so that you don’t need to worry about it!
Why Is A Subscription Staffer A Better Fit For Compliance?
Compliance is more than just determining if your new worker is a W2 or a 1099.
There may be state compliance, and even local compliance, to consider. If your virtual assistant is from a different state, for example, have you hit all the right checkboxes for business registration, tax, insurance, licensing and other compliance issues? Are you keeping an eye on any new laws or changes you need to be concerned with such as harassment training obligations?
Your independent contractor probably isn’t.
Subscription staffing companies like Boldly have a team of HR experts and attorneys who sweat these details so that you don’t have to.
Boldly takes all the necessary actions for it’s staff and you simply pay for the hours of your assigned staff member.
It’s the simplicity you would get if you used a contractor, but with the reassurance that they are actually a Boldly employee.
- No Payroll
- No Contracts
- No Employee Taxes
- No Foreign Qualification
- No Nexus Issues
- No Headaches
Subscription Staffing Beyond Employee Misclassification And Compliance
Subscription staffing isn’t just the better solution simply because you get your compliance in order. It’s the best model for all involved.
Because our virtual assistants are W2 employees, they are part of a company with a vibrant remote culture and identity. They get the benefits of being W2 with the flexibility they might have had as independent contractors. They have access to a support system from others while independent contractors are on their own.
Happy employees stick around and the investment you make in onboarding, training and integrating them into your company has the chance to bear fruit.
At Boldly our team work with clients on average for 24 months (some of them for 6 years!), because client and virtual assistant are carefully matched and each decides if they work together.
You don’t get the next available virtual assistant on the list, but one selected to fit your needs, work style, personality, and expectations.
Because the subscription staffing model operates with W2 employees who receive benefits like insurance, paid holidays, and a thriving culture, we attract Fortune 500 trained talent.
No other model offers you top talent without the headache of worrying about compliance.
Interested in exploring if we can help while avoiding employee misclassification? Let’s talk!
Updated on December 9th, 2022