The Janitorial Jigsaw: Distinguishing Between Independent Contractors and Employees
Determining whether an individual is an employee or an independent contractor can seem like a puzzle too complicated to attempt. Why decide at all? In fact, distinguishing between the two is very important in the world of contractors, specifically in the janitorial industry.
Categorizing a worker as an employee or independent contractor dictates how an employer must withhold and pay taxes on their worker’s wages; therefore, it is imperative for every janitorial business owner to differentiate between the two in order to avoid penalties and fines with the Internal Revenue Service (IRS). Some key factors can be used to differentiate employees from independent contractors, including three characteristics outlined in the “Understanding Employee vs. Contractor Designation” explanation by the IRS.
The first distinguishing characteristic is behavioral control. Someone who sets their own hours and works under their own direction is likely an independent contractor; whereas, a direct employee would have hours set by his or her employer and also be trained by the employer. The second characteristic is financial control. Employees are typically paid a salary and cannot work for others, while independent contractors often take on work for others. The last characteristic is the type of relationship. An employer/employee relationship is more permanent while an employer/independent contractor relationship is established just for a specific project.
According to a recent article in the Society for Human Resource Management, janitorial companies in California are now required by law to register with the state and maintain proper records of all employees. This is an effort to help prevent harassment and wage theft of employees. Not only will employers face penalties for improperly classifying employees, but they will also face penalties if they operate without registering with the state and keeping three years of employee records. With this new legislation, determining whether their workers are employees or independent contracts is more important than ever for employers.
USLI differentiates itself in the insurance world for janitorial risks by rating based on the number of full-time and part-time employees. Some other product advantages include the ability to build coverage to meet the applicants’ needs including the following options:
- Broad Form property damage extension
- Subcontracted work coverage
- Inland marine coverage – equipment, rental reimbursement and lost key coverage
- Employee theft coverage
- Blanket additional insured
At a time when it can be confusing, yet critical, for insureds to distinguish between their employees and independent contractors, you can give them the peace of mind they deserve by outlining some of the differences. Not only will this help them with obtaining the right coverage for their business, but also help them avoid unnecessary fines and fees.
As always, we thank you for your support and business.
Product Leader | 888-523-5545 Ext. 2320
Underwriter | 888-523-5545 Ext. 2445
Written by Meghan Ritter
September 6, 2018