Independent contractors are mostly agencies that handle a specific task in a company. It may work for a company, but when in contract, they’re still able to work for others. In short, they are not employeesand they are independent.
At first glance, it’s natural that your reaction may be that you should steer away from such services because they won’t be loyal. An example of this is a cleaning service. They can work for you, but they may also work for others.
However, as far as benefits are concerned, you’ll actually be better off hiring an independent contractor. But of course, even if they’re no employee, you still have to follow the laws regarding employment.
Here we look at the employment laws that will affect these independent contractors, and in turn, affect how you should approach the background checks of such services.
Exemption to Tax and Benefits
The hiring company may spend additional taxes on behalf of employees, such as unemployment and social security taxes, or employment benefits.
However, since it’s written in the paper that this only applies to employees, independent contractors will be a special case.
Since they aren’t employees of your company, you won’t have to spend such expenses on their services.
So, the next time you run a background check on them, make sure you focus on their reputation and management history, rather than their unemployment history or social security since it won’t be necessary.
Compliance to IRS Screening Process
The IRS, or Internal Revenue Service, uses information gathered from an employee or a self-employed group to calculate the income tax to be received.
This needs the cooperation of both the employer and the independent contractor. This is because you have to prove that the group really is an independent contractor.
They’d have to provide valid IDs, pay for the self-employment taxes, and more.
Thus, it’s important that you conduct background checks on the reviews of other companies they’ve worked for. That way, you can figure out if they did what they were required to do.
Department of Labor (DOL) Regulations
In addition to taking care of the IRS screening process, you’ll also have to comply with the regulations of the Department of Labor.
This is the most detailed regulations you’ll find, next to the IRS. So, we suggest you check the DOL Regulations in more detail.
Either way, this is the same with IRS because they’d also have to prove that the agency you hired is an independent contractor.
Lastly, you’ll find each state in the US has different regulations regarding independent contractors. Plus, if you can’t comply with them properly, there will be fines and other kinds of penalties.
This is actually quite simpler than the others. Firstly, make sure the agency is free from any hiring entity. What your business does should also be unrelated to the agency.
This is why background checks are essential. In addition to not paying a fine for being unable to comply with regulations, you can keep your company’s reputation untarnished.