Misclassification risk refers to the risk associated with incorrectly classifying workers as independent contractors rather than employees, or vice versa.
Employers sometimes misclassify workers in an attempt to reduce costs associated with payroll taxes, benefits, and compliance with labour laws. However, misclassification can lead to legal and financial consequences for employers, including fines, penalties, back wages, and potential lawsuits.
The classification of workers as employees or independent contractors depends on various factors, including the level of control exerted by the employer over the worker's activities, the degree of independence of the worker, the nature of the relationship between the employer and the worker, and the extent to which the worker is integrated into the employer's business.
To mitigate misclassification risk, employers should carefully evaluate the working relationship with each worker and ensure compliance with relevant labour laws and regulations.
What can I do to mitigate misclassification risk?
With Omnipresent’s solution, here are 3 things you can do to mitigate misclassification risk:
Take our misclassification risk assessment
Take the assessment to find out whether you have a low, medium or high risk of misclassification. You'll find our in-depth assessment whenever you onboard a new Contractor. If you have multiple workers with different circumstances, fill out one survey for each worker.
If you have high risk of misclassification, consider EOR
If the result of the assessment shows that you have a high risk of misclassification, talk to our team to consider our Employer of Record solution.Use our contract template to enhance compliance
If you opt for our Contractor product, use our contract template to organise your relationship with your Contractor. Our contract template is created by our team of legal experts and designed to minimise your misclassification risk while maintaining your flexibility.