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Misclassification of employees: A common problem

Employees are sometimes misclassified. Misclassification can cause some problems, but it tends to go unnoticed.

The real question is how businesses can make such a significant mistake. Why do they misclassify employees, and what happens if they do?

Employers commonly misclassify employees

Employers do misclassify employees often. They might do it for one of several reasons, such as:-

  • Wanting to keep operating costs low
  • Wanting to avoid providing health insurance coverage to their team
  • Preferring to avoid making Medicare or Social Security payments for their employees
  • Not wanting to give employees retirement, workers’ compensation or other earned benefits

When employers name employees as independent contractors, then that person is responsible for their own benefits. They don’t have workers’ compensation protections and won’t have employer-sponsored health care. Worst of all, they are treated as if they’re their own boss, even though they aren’t in control at all.

What happens if a business is caught misclassifying employees?

If a business is caught misclassifying employees, they could be fined significantly. They may have to pay up to 100% of the employment taxes owed and need to make up the difference in Social Security taxes and employment tax insurance. They may also have to pay fines and start providing benefits to the employees.

If you are worried that you have misclassified an employee or that you are an employee who has been misclassified, it’s important to look into your legal options. Misclassifications can be a significant issue with lasting repercussions, so it’s important to look into how to correct an issue if one exists as soon as possible.