Business owners who join a PEO will get an advantage
The Biden administration issued a new rule Tuesday intended to put more contractors on company payrolls, a change that could reverberate across a range of industries, including healthcare, restaurants, construction and transportation. The rule, which will go into effect in March 2024, would impose a stricter test to determine whether companies can classify their workers as independent contractors. It would replace a 2021 rule implemented by the Trump administration. The new regulation could affect millions of workers, though affected businesses could consider taking legal action to block the rule.
Independent contractors don’t receive federal labor protections such as minimum wage, workers’ compensation or unemployment benefits. Some companies improperly count their employees as contractors to avoid paying for those protections, Labor Department officials said. Under the new rule, if a worker can be counted as a contractor would depend on factors such as whether the job is primarily permanent or temporary, how much control an employer has over work performance or how integral a worker’s job is to the overall business.
This new rule will likely raise operating costs for small businesses due to the requirement that these workers will now be classified as employees so the employer must pay for abide by Wage and Hour regulations including minimum wage rules, unemployment taxes, payroll and tax withholding and provide workers’ compensation insurance coverage.
Joining a Professional Employer Organization (PEO) will help ensure a business will be in compliance with these new DOL rules. PEOs act as the employer of record and provide HR guidance that ensures their client businesses will navigate the regulatory landscape successfully.