Employee Classification Affects Urbana Business Insurance

Employee Classification Affects Urbana Business InsuranceEmployee misclassification is a growing problem among American businesses. Each year American employers incorrectly classify millions of workers as independent contractors. The IRS considers worker misclassification one of the major causes of the tax gap, evasion and in some cases fraud. Recently the federal and state officials have been cracking down on employee misclassification. The U.S. Department of Labor has pledged to increase its collaboration with the IRS to regulate and penalize employers for errors in their worker classification practices and to ensure compliance with applicable regulations.

According to experts, the issue of misclassification has become increasingly apparent through the implementation of the Affordable Care Act (ACA). Some employers attempt to evade providing their employees with healthcare coverage by wrongfully classifying workers as independent contractors, temp workers and other exempt employees. Whether employee misclassification is intentional or inadvertent, employers often don’t understand the affects misclassification can have on their business operations and their business insurance. In addition to the ACA and tax implications, employee misclassification can leave businesses lacking the proper Urbana insurance coverage they need to protect not only their workers but themselves as well.

An operation’s Illinois workers’ compensation needs, for example are directly affected by the type and number of employees they have. This becomes especially complicated when working with temporary and contract workers. While independent contractors are excluded from worker’s comp coverage, temp workers fall into a category known as “joint employment” which means that Urbana businesses owners share some of the liability for the worker’s safety, wellbeing and actions, should any incidents arise.

According to the Society for Human Resource Management, temp workers secured through a staffing firm or agency are not technically considered employees, and therefore not automatically covered under an employers’ worker’s comp program. While some employers see this as a positive, because utilizing these non-traditional workers can reduce worker’s comp costs, the fact is that temp workers and independent contractors can still attempt to recover losses incurred should they become injured in an on the job accident. Instead of going through a worker’s comp system, injured temp or contract workers can actually sue the Urbana business utilizing their services directly. In this case, a business’s general liability coverage would then come into play, and without the right limits employers could end up paying out of pocket for legal defense fees, settlements and more.

Regardless of how your operation’s employment system is structured, it is vital that you accurately report and classify all employees appropriately. As regulatory agencies at all levels increase their scrutiny of business and employment practices it is crucial to make sure that your operation is in full complying with all regulations to avoid legal and regulatory complications.

At the Myers Insurance Group, we can provide Urbana businesses with the guidance and coverage they need to protect their employees and their assets. We proudly offer a full array or Urbana business insurance products and services protect operations against property or liability loss, workplace injury or accident, and so much more. To learn more about our operation and our business risk management solutions, contact us today at (855) 534-5707.

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