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Employee or Independent Contractor?

My fellow author, Rush Nigut, touched on some very important issues concerning W-2 employees and independent contractors.  A great reference tool can be the www.irs.gov  web site or the Iowa work force development website as well, www.iowaworkforce.org

These two sites can be your guide in your decision process.  But of course, always consult with a tax advisor.

What does this have to do with insurance you ask?

The first words out of my mouth would be, “A tremendous amount.”

Man_in_suit If you have employees who receive a W-2 you’ll be purchasing workers’ compensation insurance. If you think you’ll get around that (and save yourself some money) by saying they’re “independent contractors” – think again.

Let’s say you require your employee – maybe an office manager – to be in the office from 8 a.m. to 5 p.m. Monday through Friday. And that person has several tasks you expect them to do at a certain each day – pick up the mail, make deposits, etc.

Does that sound like an independent contractor?

What about a sales person - someone who has flexible hours and who generally has an end result (sales) rather than specific tasks at each time each day?

The sales person may be considered an independent contractor for insurance purposes. But probably not the office manager.

As a business owner, it’s always a good idea to understand how one thing (like how you classify employees)  affects something else (like insurance). Make sure you’re keeping both your tax advisor and your insurance agent informed. If they understand your business, they’ll be a great partner.


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A very good post. One potential problem is that if you incorrectly classify an employee as an independent contractor there is always the possibility you may end up with no insurance coverage at all in important situations. This is not an area to fool around with.


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