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CFO.com recently published an article addressing state laws and the use of independent contractors.

Why all the fuss over independent contractors? Here’s why:

Many companies rely on so-called “gig workers” — a.k.a. independent contractors — to produce the bulk of their work. The two companies mentioned in CFO.com’s article are Uber and Lyft, but many more businesses also heavily rely on independent contractors. Many advertising agencies utilize independent contractors, as do manufacturing plants and the oil and gas industry.

Why? 

As you may already know, there are savings involved in utilizing independent contractors. According to a recent article published by Freshbooks, using independent contractors allows businesses to save on: 

  • Office space
  • Any equipment needed to perform the task at hand
  • Worker’s compensation insurance
  • Unemployment insurance as dictated by our region
  • Social Security and Medicare (for U.S.-based businesses)
  • Other benefits, such as health insurance and paid time off
  • Any contractor invoices

Utilizing independent contractors also alleviates the hassle of businesses paying out an employer portion of taxes every payroll. This puts the burden on the contractor and creates a delay as to when the states receive their portion of taxes in most cases. That is one of the main arguments and reasons for the changes.

All savings aside, staying on top of the conversations regarding your state will put you ahead of the curve. 

Three states currently have strict guidelines on the use of independent contractors. California became the third on Sept. 29, 2019, according to the Los Angeles Times, but this change in classification is something to keep an eye on across the country. This movement could mean a huge hit to the cost structure for your clients as a shift is possible for all states in the future. If you aren’t prepared, it could lead to misclassification fines as well as other financial threats down the road. 

If you aren’t prepared, staying ahead of the curve, and advising your clients accordingly, it could only lead to more headaches down the road.

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