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Employment Relationships

17.May, 2023

Employment Relationships

01

One of the biggest misconceptions many employers have when hiring world-class talent is that it’s up to them to decide whether or not somebody is a W2 Employee or Independent Contractor. Or that the W2 Employee vs. Independent Contractor question is simply a matter of having the right employment contract in place.

The reality of employment in the United States and most countries around the world is that this is not the case. Agencies like The Department of Labor and The IRS (or insert the blank relevant agency in the particular country you’re operating in) have established a series of rules and laws that define how to determine if someone is an employee or contractor.

Bottom line: deciding if someone is a W2 Employee vs. Independent Contractor is not up to you. 

So now that we have that part out of the way, let’s dive into this topic deeper so you can better understand what is a W2 Employee vs. Independent Contractor and the risks and benefits of each type of employment relationship. This knowledge can help propel your organization forward in the competition for the most outstanding talent on the market

What is “The Employment Relationship”? 

Before explaining who is a W2 Employee vs. Independent Contractor, let’s first take a 500-foot view of what we mean when we talk about “the employment relationship”… and no, this does not refer to dating at work.

The employment relationship is the legal and social relationship between an organization and an individual who has agreed to work for them. 

There are several different types of employment relationships, and a variety of legal and financial requirements impact these relationships in different ways. These requirements include federal, state, and local labor or tax laws, employment contracts, and collective bargaining agreements (“CBAs”). Collectively, they establish the roles, rights, and responsibilities of the organization and the individual(s) involved in the employment relationship. 

 

So when we say it’s not up to you to decide if someone is an employee or a contractor, this is why. 

The DOL and IRS have already decided this for you by establishing laws that govern the different types of employment relationships in the United States and by setting up a system to penalize employee misclassification. And we hate to break it to you, but not even the most business-friendly employment attorney out there will be able to draft a contract that gets you out of independent contractor legal requirements

 

So what are the different types of employment relationships? 

In the US, there are several common types of employment relationships, and there are different legal and financial implications for both the organization and the individual with each one. 

Here are the most common types of employment relationships: 

  • Full-time employment: This is the traditional relationship where a W2 employee works a set number of hours (often 30+ per week) in exchange for an established pay rate and is typically eligible for whatever benefits the organization offers. 
  • Part-time employment: Part-time employees are also typically paid on a W2 though they work fewer hours than full-time W2 employees (often < 30 per week) and are usually not eligible for the same company benefits as full-time employees.
  • Temporary employment: Temporary employees can be full-time, part-time, or seasonal. They’re hired for a specific period of time or project that is temporary in nature, and then their employment typically ends, or they’re hired on in a full or part-time capacity. These employees are typically paid hourly on a W2. Depending on the organization’s policies and applicable labor laws, they may or may not be eligible for benefits.
  • Internships: An internship is a temporary position designed to provide work experience to someone just starting their career. Because of the nature of control in an internship relationship, interns typically should be paid on a W2 and in adherence to minimum wage laws, but they are often misclassified and improperly compensated.  
  • Independent contractors: An independent contractor (sometimes called a Consultant, Gig Worker, or Freelancer) is not an employee but a self-employed individual who provides services to a company. Independent contractors often work in creative or specialized fields such as writing, design, photography, IT, programming, bookkeeping, etc. They are typically paid via 1099 on a project or contract basis. They are responsible for paying their own taxes and providing their own benefits.

Interested in learning more? Connect with us today at info@flexiblestaffingstudio.com