Employee misclassification transpires when a worker is erroneously categorized as an independent contractor instead of a full-time employee. Consequently, both workers and employers may fail to pay accurate employment taxes and may not receive the appropriate employment rights and benefits as mandated by local labor laws and regulations.
Engaging contractors is advantageous for temporary positions requiring specialized skills or additional capacity. However, contractors should not supervise other employees or spearhead significant projects for your organization. They should have the flexibility to set their work hours and the ability to subcontract tasks as needed.
Nonetheless, some employers might exploit ‘pseudo-employees’—workers who function as full-time, permanent staff with their responsibilities and working conditions dictated by the company but are classified as contractors. This scenario exemplifies employee misclassification, which can lead to legal and financial consequences for businesses that fail to adhere to proper classification standards.