Across the country, “We’re Hiring” signs seem to sit in businesses’ windows as casually as “We’re Open” signs. The phenomenon of experiencing a labor shortage during a global pandemic has prompted economists to search further into why, during unprecedented times, are people quitting their jobs? Let’s discuss why there’s a workforce shortage, and what it means for businesses in our article: “The Labor Shortage Explained.”
Employment Development Department (EDD) performs many services, but their primary role that impacts small businesses is collecting and auditing payroll taxes. Employers pay payroll taxes for W-2 employees, but not for 1099 independent contractors.
In short, 1099 independent contractors cannot collect unemployment. They do not qualify because of their self-employment status – meaning their employment status technically never changed because they were never employed by someone.
Independent contractors, also known as gig workers, work on a contractual basis for a specific job. This is becoming a highly desirable form of employment for individuals as well as for businesses looking to hire contractors to complete tasks outside of their typical scopes of work.
1099 independent contractors are self-employed, create their own hours, use their own equipment, are paid a set rate, and do not have payroll taxes deducted from their payment—which saves employers money.
When performing a job, there is a possibility for injury. A roofer could slip and fall off a roof, a plumber could injure themselves fixing your pipes, the list goes on.
What happens if you hire an independent contractor, otherwise known as a gig worker, who is injured while working on your project?
So, let’s answer the question: What happens if my gig worker gets injured on the job?
Using independent contractors to assist with your day-to-day business functions is becoming increasingly popular. Before you look to hire contractors, it is important to understand what should be included in the contractual agreement. This helps keep your business safe from legal trouble in the future.
Depending on the state you live in, and the employer policies, part-time workers may not be eligible for the same benefits as full-time employees. While the benefits they must be offered differ based on their hours, that difference does not relate to their classification as a 1099 vs a W-2. Misconceptions persist regarding employment classification of part-time vs full-time vs contract or project-based workers. Following is an explanation and clarification of why a part-time worker can be a w-2 employee.
Certified Public Accountants (CPAs) have the most insight into their business owner clients’ daily transactional history. In this role, you may find that your business owner clients have 1099 contractors who are in the grey area of worker classification now that classification was redefined by AB-5 in January 2020.
The California Employment Development Department (EDD) is a government agency that provides unemployment benefits, collects and audits payroll taxes, and maintains California employee records. With the new AB-5 regulations, there are stricter worker classification rules. Now, workers are only classified as independent contractors if they meet all three criteria of the ABC test.
Hire an independent contractor and comply with California law to avoid triggering an Employment Development Department (EDD) audit. Following the steps below does not guarantee that your contractor will still remain a contractor if you are audited by EDD. However, there are ways you can strengthen your position and not have your contractors reclassified as employees.