Workers' compensation insurance premiums depend on employee classifications and payroll.
In the past, this fact led many New York small business owners to classify employees falsely as independent contractors. It was a tactic to avoid high premiums and save money. Or make no insurance payments at all.
This fraud still occurs today. And it can quickly lead to serious trouble, especially if a misclassified worker suffers an injury and expects workers' compensation benefits.
It is essential for business owners to understand the differences between employees and independent contractors. This knowledge can help employers prevent serious consequences.
Important differences to note
The New York State Department of Labor explains important legal differences between the two workers, including:
- What protections they receive under employment laws
- How they file their taxes or report their income
- How they are hired for their services
- When and how they collect their earnings
Both workers might complete similar jobs, but the details of their legal statuses remain different.
What is the main difference between the two statuses?
Independent contractors often run their own businesses. And their business is to offer services to assist other companies. They can also be individuals who work for your business for a limited time. Because of their limited service, they do not qualify for regular employee benefits.
This is the biggest difference between the two statuses. Employees have access to workers' compensation benefits. Independent contractors do not. This difference is also the reason for classification fraud.
How to avoid issues with misclassification
Business owners have the power to avoid the consequences of classification issues. When they evaluate the details of each worker's employment, they can classify all of their workers correctly.
Workers' compensation claims can be complex. However, you can minimize stress and risk if all of your workers have the correct classification.