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Schaumburg employment law attorney for independent contractorsDepending on the industry or field of work, companies may hire employees or independent contractors (often called freelancers) or even a combination of both. Although either type of worker may perform similar job duties, it is important to understand the distinction between them as an employer. The federal Fair Labor Standards Act (FLSA) considers several factors to determine whether a worker is designated as an employee or an independent contractor. Some of the main differences between these types of workers include how they are paid, taxes, and insurance benefits. Every business is unique, and what works for one company may not work for another. If you are an Illinois business owner, it is imperative that you understand the laws and how they relate to your employees. In some situations, utilizing independent contractors may benefit your business in the long run.

Cost Savings

One of the major benefits of using independent contractors versus salaried employees is the cost savings. As a business owner, when you hire a worker who is classified as an employee, you have to pay additional expenses that you would not pay for an independent contractor. These costs include the following:

  • Medical/dental/vision insurance
  • Equipment/supplies/office space
  • Workers’ compensation insurance
  • Social Security and Medicare taxes
  • Unemployment compensation insurance

Staffing Flexibility

In some cases, a company may only need workers for certain periods of time throughout the year. During these “busy times,” an employer can hire personnel based on fluctuating workloads. This alleviates having regular employees sitting around doing nothing during the “slow times.” In addition, independent contractors or freelancers may possess special skills or knowledge related to a project, reducing the time spent training newly hired employees. Using freelancers can also help you avoid potential lawsuits that can accompany layoffs or firings, since it is considered “contracted” or temporary work.

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Schaumburg independent contractor classification lawyerIndependent contractors play an important role in many companies. Especially in smaller workplaces in an unstable economy, business owners often choose to hire an independent contractor rather than add another employee to the payroll. This decision is beneficial if appropriately implemented. However, employers should be aware of the common, costly mistakes that can occur in these situations.

Why Hire an Independent Contractor

As a business owner, think about how long it took you to put your team together. The hiring process alone takes an ample amount of time to narrow down the candidates, ensuring you have the right one for your position. Then, consider the days, weeks, or even months of onboard training needed to prepare that employee to be useful in their job. However, that employee may not remain with the company for the hoped duration. Perhaps there is conflict in the workplace, they find another job, or some personal family struggle requires them to step away from their position.

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Illinois employment law attorneyWatching your company go from a little-known business to booming can be exciting. It can also be a little anxiety-inducing. You need someone to help you fill orders, stock product, or make deliveries. Or maybe you need someone to set up a website or manage your social media page. Unfortunately, you may not be able to hire an employee just yet. Perhaps you cannot afford to pay someone for regular, part-time hours, or maybe you are not set up yet for income tax withholding. Whatever the situation, an independent contractor could be the answer. How can you tell? The following information may help.

What is an Independent Contractor?

In its simplest definition, an independent contractor is someone that works for themselves, not your company. You are not responsible for paying their taxes, you do not have to provide health insurance or carry workers’ compensation to cover them, and you are not liable for their actions while they are working (note that there may be exceptions here). You simply pay them for the work they have done and, if necessary and desired, continue to do so. Then, come tax time, you file the appropriate form to show that you paid a contractor for work.

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contractors, Schaumburg employment law attorneyWhen your business requires extra hands, you have two choices. You can hire employees or you can enter into contractual agreements with independent contractors. As you probably are aware, there are advantages and disadvantages to each, and it is important to choose the one—or the appropriate combination of the two—that best meets your company’s needs. The challenge, however, is that it is up to you as a tax-paying business owner to classify your workers properly in accordance with state and federal law, as failure to do so can result in serious financial penalties.

Moving Company Claims Movers Are Contractors

Last month, an Illinois appellate court issued a decision in a case that has been ongoing since 2009, when a former worker for the moving company filed for unemployment benefits. The Illinois Department of Employment Security realized, at that point, that the moving company had not reported any of the worker’s wages. Looking further, the Department discovered that approximately 90 other drivers and physical laborers should have been listed as employees but were not.

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uber, Illinois employment law attorneyThe Uber driver that initiated a lawsuit against the ride-sharing company almost three years ago has come out against the $100 million class-action settlement to which he had previously agreed. The man now believes that the deal was misrepresented to him by his attorneys, and that he was forced to agree to its terms under duress and false pretenses. Still awaiting approval from a federal judge, the settlement would allow Uber to continue to classify its drivers—which the company calls “partners”—as independent contractors rather than employees.

Suit Sought Reimbursement for Mileage, Tips, and Expenses

Throughout the country and around the world, Uber drivers are classified by the company as independent contractors, as drivers are free to set their own schedules and areas of operation within the cities in which they are approved to drive. This means, however, that drivers are responsible for all tax reporting, as well as any and all expenses they may incur. The issue has been broached previously in cases involving accident liability and workers’ compensation, but the recent class-action suit was arguably the most widely covered by various news outlets.

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1051 Perimeter Drive, Suite 400
Schaumburg, IL 60173
Phone: (847) 995-1205

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