Numerous businesses have expanded the number of international employees they employ due to the surge in global employment. It’s important to keep in mind that worldwide hiring comes along with certain drawbacks, much like employee misclassification. According to studies, 10 to 30 percent of companies mistakenly identify at least one of their employees as an independent contractor.
In the US, there are reportedly millions of incorrectly classified workers, which equates to millions of dollars in unpaid employment taxes. In 2008, New York alone lost over $4.8 million due to unpaid severance fees. Not only do the government’s back taxes harm Social Security and Medicare finances, but they also have an impact on every taxpayer in the nation.
Penalties Due to Employee Misclassification
Whether intentional or not, employee misclassification is illegal and subject to punishment and fines. Various countries impose varying punishments on organizations that are guilty of the offense. The misclassification of employees penalty varies depending on several elements, including the size of the business and the length of the misclassification. These punishments might range from a small fine to an expensive one for persistent rule-breakers.
Holland Services misclassified 700 workers in 2021. The DOL’s inquiry into this matter revealed that the corporation owes roughly $43,277,000 in overdue wages and damages.
Tips to Protect your Organization from Employee Misclassification
- By correctly classifying your workforce, you can protect yourself from fines and penalties.
- A smart place to start is understanding the distinction between independent contractors and employees.
- The next step is to update your contracts to reflect current legal requirements and have legal professionals review them.
Employing workers locally and globally shouldn’t automatically put you in danger of being misclassified. You can safeguard your workforce rights, benefits, and protections with the appropriate worker classification while also protecting your company from costly penalties, fines, and reputational harm.