In a reply to my recent post about employees, it was suggested that new hires be treated as independent contractors for a period of time until they have proven their worth.
On the surface, this might seem like an ideal solution. No obligations on either side until everyone is comfortable. I only wish it was that easy. Most states require a valid contractor’s license. Treating an unlicensed individual as a contractor can open you up to a plethora of legal pitfalls.
Many companies use tactics like limiting an employee’s schedule to avoid having to give them full-time status and the accompanying benefits. But there is a big difference between a part-time employee and an independent contractor.
I once fell into this trap myself, paying an employee his full wage with no tax deductions, considering him, by mutual agreement, to be an independent contractor. But after several years, our working relationship went south and, at the same time, he got called on the carpet for not paying the taxes. After a long legal wrangle, too lengthy to detail here, guess who ended up holding the bag? It was determined that he was never an independent contractor but an employee and it became incumbent upon me to pay all of the back taxes, Social Security payments, etc., that should have been deducted from his weekly check. I had to make these payments even though I had given that money to the employee and he was supposed to pay them himself.
Needless to say, this amounted to a pretty penny. There went that new drum sander I was planning to buy! So be careful on this one. Check local, state and federal laws before entering into this kind of arrangement.