If you’re in the Event business today, you’ve most likely heard about employee misclassification. Should you classify your temporary crew as independent contractors under form 1099 or as part-time W-2 employees? In recent years, several branches of the government began cracking down on employee misclassification, focusing on those industries that operate with a contingent workforce, such as Event Services.
Many Event Service organizations have been weary of hiring their crew as part-time W-2 employees instead of 1099 independent contractors due to several misconceptions about what this could mean for their business. At LASSO, we help you navigate employee classification, and our event workforce management software solution even enables you to account for enhanced cost savings when appropriately classifying your crew.
Here are three major misconceptions about a W-2 crew and how these can impact your Event business.
Misconception #1: A W-2 Crew Costs More than Independent Contractors
Many businesses think they can save money by hiring independent contractors instead of taking on more W-2 crew members. While it’s true that you don’t have to pay 1099 crew benefits such as Social Security and Medicare, it’s also true that an independent workforce may cost you more money in the long run.
Why? Because it’s up to you to prove to the government that your employees are independent contractors. The stakes are high. Whether intentional or accidental, misclassifying workers is a costly misstep that can lead to fines, audits, and other forms of investigation by the IRS and the U.S. Department of Labor. What is more, your business carries all of the liability in the event of misclassification. That means employers must have all the information at hand to properly classify their crew members and ensure they are compliant with government regulations.
On the other hand, by employing more W-2 crew members, you are actually able to SAVE your company money. How? For one, you are able to bill your customers sooner, rather than having to wait to receive invoices from contractors. Additionally, by using LASSO’s events workforce software, you will have full control over whether and when part-time W-2 employees reach full-time or overtime status, eliminating the need for benefits and/or other added costs. With LASSO, you will have all of this information at your fingertips so that you can make more strategic crewing decisions. In the end, that kind of efficiency saves time, money, and headaches.
Misconception #2: We Just Don’t Hire W-2 Crews in This Industry
Once upon a time, businesses could hire their crew as either 1099 contractors or part-time W-2 employees without a second thought. That’s now a thing of the past. Along with the IRS, the U.S. Department of Labor has been leading a charge against employee misclassification with 35 states and counting who have joined in signing Memorandum of Understanding agreements with the DOL to jointly pursue companies that misclassify their crew as independent contractors. It is now more important that ever for Events businesses to ensure that they have correctly classified their crew.
In having operated within this industry for many years, we have seen a shift in companies moving toward an environment where all crew members are properly classified. And, in many cases, this means reclassifying their 1099 crew as part-time W-2 employees.
The proof of this is in the numbers. 5 years ago, the number of companies that employed part-time W-2 employees was pretty much zero – almost everyone hired 1099 contractors alone. Last year, based on LASSO’s survey results, 47% of companies hired both 1099 contractors and/or part-time W2 employees. This year, based on our new survey results that will be launched in the coming weeks, 75% of companies hired both 1099 contractors and/or part-time W-2 employees in the last year.
In order to remain compliant, employers must adapt. So, will you adapt sooner…or later? Three main reasons Events companies are properly identifying crew members are:
- To maintain compliance in an increasingly regulated business environment
- To increase their operational efficiency
- To save themselves the costs and burdens of government audits
Misconception #3: We Will Lose Crew Members by Reclassifying Them as Part-Time W-2 Employees
Because many companies have already made this transition, chances are your crew is probably already working as W-2 employees elsewhere. Educating your people on the advantages of being an employee is important because many don’t understand how it benefits them. Not only can it be a good business decision for the company but it can provide great benefits for your people, and keep you both out of hot water with potential audits.
Stay tuned for our next blog where we dive further into this misconception.
- Download LASSO’s Employee Misclassification Whitepaper: The Stakes Are Higher Than Ever
- The Evolving Employee Misclassification Debate