Do the risks of using non-employee workers outweigh the benefits?

With changes in the economy and with the future of health care many businesses are leaning towards using non-employee workers. This means instead of being on the books as an employee the person is given 1099 status as an independent contractor. In a recent article, employment law attorney Todd Lebowitz states that fewer employees have always meant lower healthcare costs, but after health reform, having fewer employees also means less exposure to penalties that will be imposed when employees opt out of company-sponsored health coverage.

While it sounds beneficial, there are potential risks. Companies that misclassify workers as nonemployees face a range of potential penalties and liability--under tax law, employee benefits law and employment law. In response to the high number of businesses classifying employees as independent contractors the IRS is planning to conduct 6,000 worker misclassification audits over the next three years. Not only will there be audits, but the government is considering creating legislation that would impose additional penalties to companies that misclassify their employees.
According to Lebowitz, Companies who misclassify workers as nonemployees may face liability under a range of legal theories, including:

•  Failure to withhold employment taxes, plus penalties and interest.
•  Failure to pay FICA and FUTA, plus penalties and interest.
•  Failure to pay overtime or minimum wage.
•  Failure to provide employee benefits.
•  Failure to obtain proof of eligibility to work in the United States.
•  Increased exposure under anti-discrimination and anti-harassment laws.

Knowing all of this, would you consider keeping employees as independent contractors or is it not worth the hassle? How do you save money on health insurance for your employees? Comment below.

Does Group Health Insurance Make Sense for My Business?

Like most Americans today, healthcare reform is at the forefront of the minds of virtually all business owners, managers, and employees. While planning ahead is always a good move, many of the components of President Obama’s proposed legislation will not take effect until at least 2013. In the meantime, we still face the age-old question: “Does group health insurance make sense for my business?”

Obvious factors such as cost of premiums, tax benefits, and overall health of staff are common to all businesses. Instead, let’s explore the question using conditions specific to the relocation industry: injury risk, high turnover rate, and low wages.

Injury Risk

Movers are obviously subject to rigorous physical activity which can put them at higher levels of risk for injury. It might make sense to help keep employees as healthy as possible by offering medical benefits, which may also keep workman’s compensation claims to a minimum. However, many hourly laborers continue to work with known injuries to avoid missing any wages for time off tending to them.

High Turnover Rate

Most group insurance plans require a 90-day employment period before new hires become eligible. This helps avoid unnecessary paperwork and administrative costs for the employer. Unfortunately, there tends to be a high turnover rate amongst relocation professionals, so a relatively high percentage of workers never become eligible for benefits in the first place.

Low Wages

Of course some employees will inevitably stay with you for longer terms, rendering them eligible to participate in a group insurance plan. In general, employees with healthcare benefits tend to be happier with their employment and of course in better shape to perform their jobs. Although according to the U.S. Department of Health and Human Services, workers with lower wages may prefer to keep more of their paychecks over contributing to group insurance premiums. Tack on deductibles and co-pays, and suddenly healthcare coverage doesn’t look so attractive to a low-wage, hourly employee.

So, should you provide group health insurance benefits or not? We’re willing to bet that for most relocation firms, it just doesn’t make sense financially. However, we want to hear from you! Are you currently providing medical benefits? Why or why not? Share your thoughts and discuss in the comments below.