As a construction company, you can decide if a worker is an employee of your firm or an independent contractor. Classifying an employee as an independent contractor without good reason, could result in being held liable for back employment taxes and benefits on that worker. Before you can handle payments, taxes, and labor laws, first know the business relationship that exists between you and the person performing the services. Your Jacksonville construction attorney will know how to classify your construction worker and the taxes, payroll, and laws concerning them.
According to the IRS, to determine whether the worker is an employee or independent contractor, ask these questions:
- Does the company control (or have the right to control) what and how the worker does their job?
- Does the construction firm control how the worker is paid, reimburse expenses, and provide tools and supplies?
- Does the employee have a written contract with benefits (i.e. pension plan, insurance, vacation pay, etc.)?
- Is the work provided ongoing and a key aspect of the business?
Taxes are not withheld for the independent contractor. However, the employee has taxes withheld for income tax, Social Security, and Medicare. An independent contractor is responsible for paying all of their own taxes at the end of the year, providing their own health insurance, and a paying any unemployment or workers compensation claims.
Employees must be paid consecutively every pay period. For most employees that pay period is biweekly. Independent contractors can be a paid a lump sum before, during, or at the completion of work. Paying the independent contractor is usually done after the worker provides an invoice and it could be for an hourly, daily, or weekly total that ends on a specific date.
Employment and Labor Law Differences
As an employee to the the construction firm, you are covered by employment and labor laws. Independent subcontractors are not covered or protected by labor laws, which include discrimination and harassment laws.
Companies in the construction industry should perform a regular internal audit on the status of their workers and to ensure their correct classification.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.