1099 Risk Blog

Contractor Classification Tip #5

Here's the next independent contractor classification tip in our series. Tip #5: 

Use the right engagement method.

After you've accurately assessed the status of your independent contractors, you must select the correct engagement method for your compliant and non-compliant contractors. To accurately assess but then incorrectly engage contractors defeats the purpose of doing contractor compliance in the first place, but we're surprised how often we encounter this practice.  

Engage non-compliant contractors as a W-2 employees through an EOR (Employer of Record – recommended for clerical/administrative workers operating on an hourly basis and do not have business expenses) or a PER (Portable Employer of Record, recommended for higher-billing independent consultants who may have more than one client, work on a project or hourly basis, have business expenses, and require higher service levels).

For compliant contractors, you may engage them as vendors, or use an Agent of Record that can consolidate billing and maintain compliance.

Better yet, use a third party service (like MBO Partners, for example) that you can send all your contractors to for assessment and engagement. You may be able to realize savings and reduce the cost of compliance by streamlining your program, and using a vendor that can get virtually any contractor safely engaged and working in your operation.

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