Employee misclassification sounds confusing, but really it’s just a long winded term for mislabeling an employee’s job description. Some businesses do this on purpose to exploit workers and cut costs and other businesses do it by accident. Below are some fast tips on why it’s illegal and how your business can avoid it.
1. Full-Time Employees Can't Be Contract Workers (and Vice Versa)
An exorbitant amount of people in the U.S. and Canada make ends meet by taking contract jobs. The growth in full-time freelance and contract work is overshadowed by the sad reality that employee misclassification is also on the rise. It’s expensive for businesses to give full-time employees the proper pay, special benefits, and tax deductions they’re entitled to. For this reason, many choose to exploit and illegally hire contract workers to do the same work as full-time employees, but without any of the perks.
Employers may be misclassifying workers if their contractors:
- Are working the same hours as employees
- Are fulfilling the same tasks as employees
- Don’t have time to take on other clients
- Don’t have control over their work
- Don’t have control over their pay
2. Misclassifying Employees Carries a Steep Price
If businesses don’t wise up and take precautions to ensure they aren’t taking advantage of employees, they run the risk of being charged by governing bodies. Government organizations like the Ministry of Labour are becoming stricter at enforcing labor laws, but the ramifications of misclassification aren’t always clear. If you intentionally misclassify an employee, you could be fined or charged with fraud. If you do it accidentally, you’ll still have to deal with the ramifications.
At the end of the day, there are also social repercussions to crimes relating to employee misclassification. When companies of any size exploit employees, they often become the subject of national headlines. People also take a stand through social media and the internet. There are even sites like Glassdoor that help warn job-seekers about dicey companies. Former workers can write negative reviews about places they’ve worked at, tarnishing corporate reputations.
4. Unpaid Internships and Volunteer Positions Can Also Be Exploitative
Too often, young people and other job-seekers are told they need to gain unpaid experience before they can be afforded the privilege of being paid for their work. However, “volunteer” work positions and unpaid internships are increasingly scrutinized by labor lawyers and journalists who argue that this work is exploitative and unfair.
Unfortunately, many companies manage to find legal loopholes that let them get away with hiring temporary workers to do the same work as paid employees. These businesses are not safe from legal repercussions of their actions and cutting corners often tarnishes their social standing. It’s best to avoid these outdated practices and be the face of change.
5. Payroll Providers Can Prevent Employee Misclassification
Sometimes businesses, including start-ups, aren’t familiar with all of the legal procedures involved in hiring new employees. For this reason, it can be extremely beneficial for local and international companies in Canada to partner with payroll providers who are committed to helping them hire new employees and negotiate pay and benefits. These outsourced companies also take on other unique services. They’ll conduct internal investigations when necessary, file taxes, and manage legal issues. The bonus? It’s all done by the books.
Find additional tips about employee misclassification on The Payroll Edge resource page. If you’re interested in outsourcing a trusted payroll provider to manage job descriptions, payroll duties and more, contact us today!