You’ve probably heard the old adage that “nothing in life is certain but death and taxes.
Businesses that experience seasonal peaks and valleys―such as tax agencies, ski resorts, and retailers―often choose to hire temporary workers because of their flexibility. If you’re thinking of hiring seasonal temporary workers, two primary sources to consider are interns and contingent workers. Interns are perfect for summer and holiday jobs because their time off from school matches the business’s busy season. Contingent workers (including contractors and freelancers) tend to have years of experience in their fields, yet have made the choice to work either part-time or on a contractual basis.
Hiring of Temporary Contingent Workers and Interns Is Increasing
It has now become quite routine for interns and contingent workers to cycle in and out of the workplace according to a company’s seasonal needs, and this temporary staff often works “virtually” as workplaces disperse and telecommuting becomes the norm.
Temporary contingent workers
According to the U.S. Bureau of Labor Statistics, the fastest growing labor segment is the temporary help services industry, which has added 54% of all new jobs. Highly skilled industries such as engineering, IT, sales, and accounting are now hiring more professional workers on a seasonal or contract basis to achieve greater efficiency, and many of these workers execute their duties from their home offices or another off-site location, depending on the type of work to be performed.
Internships benefit students and new graduates by giving them an important foot in the door as they try to enter today’s tough job market, while employers benefit by pulling from this enthusiastic talent base to help fill their hiring needs. According to a December 2012 survey by Internships.com:
- 53% of the 300 companies surveyed plan to hire more interns in 2013 than they did in 2012
- 47% of employers have a structured internship program
- 33% of employers hire virtual interns―a 20% increase from 2011 to 2012
Labor Laws Still Apply!
It is critical to note that seasonal businesses are not exempt from adhering to applicable employment regulations. In fact, many of the same laws that apply to full-time employees also apply to seasonal workers, and you must be cognizant of complying with them. In the U.S., for instance, laws that cover workplace health, safety, or discrimination apply to temporary employees, seasonal workers, and interns just as they do to any other employee. And, under the Fair Labor Standards Act (FLSA), part-time and full-time employees have equal rights concerning such things as minimum wage, overtime pay, and recordkeeping. Some states also require that you carry workers’ compensation insurance for interns.
Consequences of Misclassifying These Workers
Taxes and the independent contractor
If your business uses both regular employees and independent contractors you may think there are few differences between them―they do the same work, have similar goals, and you pay them both for their contributions―but your federal tax authority knows the distinction. If you don’t understand what constitutes an independent contractor versus a regular employee, you can quickly step into trouble. According to the U.S. Internal Revenue Service, for example, “In general, someone who performs services for you is your employee if you can control what will be done and how it will be done.” So, if you exert any type of control over when, where, and how work is performed by an independent contractor, you may be getting into murky legal waters.
Statistics suggest that up to 30% of firms are guilty of misclassifying contingent workers, which translates to billions in unpaid taxes. If your business is found to have misclassified workers, you may incur back payroll taxes, interest, and stiff penalties, not to mention a significant amount of paperwork.
Paid or unpaid internships? There’s more to it than you think
According to Internships.com, one third of businesses surveyed chose not to pay their summer interns. If you want to attract the right talent, however, then it’s worth compensating your intern(s) appropriately. But there is more to it than that. The U.S. Department of Labor puts parameters on the type of work that unpaid interns can perform under the Fair Labor Standards Act (FLSA): unpaid internships must be educational in nature, and must be for the benefit of the intern. In other words, your business can’t be seen to derive any immediate advantage from the unpaid intern, and the intern cannot do any work or tasks that help you run your business.
If you think the legal system will turn the other cheek over such “minor” issues as having the unpaid intern fetch coffee or make copies, think again. Misclassifying interns can have huge repercussions. Just look at the “Black Swan” intern case, where a judge ruled that Fox Searchlight Pictures had violated both federal and New York minimum wage laws by failing to meet the criteria for unpaid internships under the FLSA. Fox Searchlight had classified the internships on the Black Swan film production as unpaid, even though the tasks that the interns performed basically displaced the work normally done by production assistants. The judge therefore determined that Fox Searchlight should have paid those interns because they were essentially acting as regular employees.
Protect your Bottom Line with Cloud-based Time and Attendance Software
Because contingent workers and interns are different than “regular” workers―in that they often work ad hoc hourly rates, receive alternate benefits plans, have their own specific category classifications, and/or are taxed differently―they absolutely must be tracked accurately with the best available time tracking tools, otherwise employers can expose themselves to potentially expensive litigation.
Yet, many organizations still rely on old-fashioned paper-based manual systems or Excel spreadsheets to track their time. The challenge with these systems is that they simply cannot track employee time by different billing or hourly rates, or provide an audit trail for legal compliance purposes. If you need a better way to manage your company’s seasonal ebbs and flows, consider seeking out a modern solution.
Cloud-based software solutions take the stress out of seasonal employee time tracking. For employees it’s a snap to input such things as hours worked, overtime, and meal breaks. For supervisors, it’s simple to review and approve the timesheets, and for Payroll to process them. What’s more, companies will have immediate access to accurate source documents for automatic submission to regulatory bodies, which will help negate the very real risks that can arise from failing to comply with the requisite regulations. With cloud-based time and attendance software, companies can seamlessly track their dispersed seasonal workforce, reduce errors and inefficiencies, create accountability, gain better visibility into internal activities, and ensure the full productivity of their temporary staff.