Be Prepared...Create Policy
In our series this week about preventative measures organizations can take to mitigate risks and costs associated with the use of Contract Labor, we wanted to address the first line of defense...Be prepared.
Like the Boy Scouts mantra of "Be Prepared", there is no better way of mitigating the risks you might have if your firm were to be pulled into a tax audit for the misclassification of employees. As a basic in Human Resource Management, your firm should work with HR and Legal to craft the company's general position on the usage of independent contractors. That policy should include, but not be limited to:
- How to Engage a Contractor?
- What are the Legal Requirements?
- What is the Tenure Policy?
- What Information do I need to Gather?
- Who do I Need to Contact?
In addition to the policies, create an educational FAQ that can be accompanied to the policies and demonstrate that your organization has take the proper steps to protect, document, and educate its company.
Remember, if you do all these things you won't prevent an tax audit nor will you avoid potential penalties, but having these items in place and documented will demonstrate to the courts and the auditors that you took the right actions to try and "prepare" yourself as best as you could.
If you want help in getting prepared, don't hesitate to take our free Risk/Reward Assessement to determine what exposures your firm might have.