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Payroll Solutions – Employer of Record: A Risk Management Solution

Posted by Jeff Pelliccio on Jul 27, 2015 8:29:00 AM

In ICS insights

A Risk Management Solution in a Business Environment Soaked with Risk

Infinity Consulting Solutions (ICS) provides clients with a customized and flexible Employer of Record Payroll solution that expertly handle contractual labor that was NOT located through the usage of a third-party staffing supplier. 

Individuals that typically work well within an Employer of Record Payroll environment include:

  • Manager Identified Talent: Workers that the hiring manager already is familiar with, or that have likely worked upon projects within the department in the past.

  • Disqualified 1099’s: For organizations that do not allow 1099 workers to be on-site, the leveraging of a Pass-Through Payroll program allows clients to convert  1099 workers over to being W-2 employees of ICS.  This conversion will allow organizations with strict policies towards 1099 workers to have access to a broader array of available talent.

  • Tenured Contractors: When a contractor has exceeded their tenure limitations upon a certain project, there MAY be an opportunity to reassign that worker through an Employer of Record Payroll solution, and thus allow the worker to remain involved through completion.

  • Alumni: Some individuals have proven their indispensability to be greater than others.  In the case of those that have retired or which have left an organization for other opportunities, a Employer of Record Payroll option can provide management with a way to maintain the worker on a consultancy basis.

In addition to providing clients with an alternative option for maintaining talent, an Employer of Record Payroll program provides tremendous risk management measures, against IRS Employment Tax audits.  These audits are typically triggered by an unemployment claim by a contractor who had previously been reclassified by their home-state from being an Independent Contractor, over to being a full time employee.  

The ICS Employer of Record (EOR) Payroll solution employs a vetting-process which will ensure the appropriate classification of a worker from the start, and thus prevent employment tax audits down the road. The ICS EOR Payroll vetting process heavily involves the IRS-20 Factor Test, in order to ensure appropriate classification.  The IRS 20-Factor Test is the IRS’s principle tool for evaluating employment status under the “common law right to control”.  By asking a series of high-level questions (similar to the questions below), ICS can determine if the IRS will view a worker as either an independent contractor or as a full-time employee:

  • Is the worker required to follow company instructions?
  • Does the company provide training to accomplish the work?
  • Is the worker regularly employed at the company?
  • Does the company directly pay any assistants to the worker?
  • Are there a specific number of work hours?
  • Is the worker required to submit regular reports to the company?
  • Is the worker reimbursed for their expenses?

If the answer is “Yes” to the majority of these questions, then that worker is a full-time employee and should be classified (and taxed) as such.  If the majority of answers are “No”, then that worker should remain classified as an Independent Contractor.  

It is of the utmost importance for an organization that maintains an appetite for contractual labor to be as honest and objective as possible when they review their usage (and payment polices) of independent contractors, in order to ensure compliance with various state and federal agencies.  

In the case that a worker assigned to the Employer of Record Payroll program is facing an IRS audit of employment taxes, any and all queries from the IRS are directed at ICS, not the client. In addition to the Risk Management measures associated with the IRS, the ICS Employer of Record Payroll program helps clients mitigate co-employment risk, by assuming all fees and exposure associated with Unemployment, Workers Compensation, and Accidental Death (AD&D).  

In addition, contractors assigned to the program are entitled to a full suite of benefits, which include full healthcare, dental, vision, transit reimbursement, 401k investment, and supplemental health and life insurance.  By partnering with ICS for Payroll solutions, our clients are able to ensure that they are continuing to receive the best available talent for all of their project worker needs, while at the same time providing themselves with a level of risk management that help ensure project completion. 

For any questions pertaining to ICS Employer of Record Payroll services, please contact Managing Partner, Matthew Walden at 646-442-8447 or via email at mattw@infinity-cs.com.

- See more at: http://www.infinity-cs.com/about/our-services/eor-payroll-services/