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How to prevent employee misclassification

Employee misclassification can be a significant problem for businesses, especially for ones that use various pipelines to create their workforce. Misclassifying staff can lead to hefty fines and penalties for employers

To prevent this from happening, it’s important for business owners to put best practices in place.

What is employee misclassification?

There are two types of workers: employees and independent contractors. Misclassification occurs when an employer incorrectly categorizes a worker as a contractor instead of an employee. This can lead to the worker not receiving certain benefits they would be legally entitled to, such as:

  • Health insurance
  • Overtime pay
  • Paid time off
  • Unemployment insurance
  • Minimum wage
  • Workers’ compensation coverage

Here are some best practices for employers to follow to prevent employee misclassification:

  • Train your hiring staff and human resources department to understand the difference in employee classifications. Some may not realize that a temporary employee from a staffing agency is considered an employee and not an independent contractor.
  • Look over your policies, procedures, and classification process to ensure you are compliant with state and federal laws.
  • Outline clear expectations for job roles
  • Ensure your employment agreements clearly state the classification and role of a worker.
  • Consult with regulatory agencies to clear up any confusion as to which classification a worker belongs to.
  • Regularly review your workforce to ensure you are correctly classifying workers.

Preventing employee misclassification takes diligence and effort from the employer. There should be clear language in contracts so employees and independent contractors understand and agree upon their rights before beginning work. You may want to work with someone who can help ensure compliance with the law.

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