As a business owner, keeping up to date with federal and local legislation is crucial. One such important change comes from the U.S. Department of Labor (DOL), which has published a final rule regarding independent contractor classification under the federal Fair Labor Standards Act.
The new rule is effective starting March 11, 2024.
This reinstates the previous version of the "economic reality" test, which helps determine if a worker is an employee or an independent contractor (IC).
Understanding the economic reality test
Although the DOL hadn't used this test for a few years, many state agencies, courts, and the IRS continue to apply it. Consequently, most employers did not need to reclassify their employees during the rule’s brief hiatus, but it's always worthwhile to revisit your classifications. The economic reality test considers six factors:
The opportunity for profit or loss for the worker.
The relative investments made by the worker and the employer.
The degree of permanency of the work relationship.
The degree of control an employer has over the person’s work.
The relevance of the work the person does to the employer’s business.
The level of skill and initiative of the worker.
Remember, some states, like California, use more stringent tests (like the ABC test), and workers in these states must pass these to be correctly classified as independent contractors.
QuickBooks can help you manage human resources issues
While the classification of your workforce is no small task, it doesn't have to be daunting. Through QuickBooks Online Payroll, you can not only manage your payroll but you can also get access to comprehensive human resources services.
Benefits of HR Services with QuickBooks Online Payroll:
Efficient Payroll Management: QuickBooks Online Payroll simplifies the process of paying your employees or contractors. It automatically calculates earnings, deductions, and taxes while providing a variety of payment methods.
Taxation Guidance: QuickBooks Online Payroll provides tools and resources to guide you through complex taxation processes, keeping you compliant with the latest laws and regulations.
HR Support: QuickBooks Online Payroll is linked with HR advisors who provide valuable guidance on best practices, policy setup, and help to ensure your business is compliant with the DOL's rules, including those about independent contractor classification.
Integration: QuickBooks Online Payroll can be integrated with your existing QuickBooks accounting system. This streamlines your operations, allowing for a single platform to manage your payroll, finances, and HR needs.
Employee Data Management: With QuickBooks Online Payroll, you can effortlessly track attendance, manage leaves, and store confidential employee information securely.
With the changes to the DOL's rules, now is the time to assess your business's employee classification and ensure you're meeting legal requirements. Utilizing a comprehensive service like QuickBooks Online Payroll can help streamline this process, allowing you to focus more on your business growth and less on administrative tasks.
Don't let the complexities of HR and payroll management slow you down. Equip your business with QuickBooks Online Payroll today. Peak Advisers can help you get started.