1099 Risk Mitigation &
Consulting Services
Risk Assessment Services
Most organizations agree the use of contingent labor is an integral part of corporate structure today. They open access to pools of highly specialized skills on an “as needed” basis while permitting operational flexibility and decreasing long term obligations. In addition, they reduce training, certification, licensing and continuing education expenses normally associated with employees. Best of all they provide these wonderful advantages without costly FICA, Federal and State taxes, unemployment insurance, workers comp, and a variety of benefits usually bestowed to employees.
The contingent workforce can generally be defined as non–employees who are performing work for the benefit of the client company. These workers offer significant benefits in cost savings, productivity and expertise as a supplement to regular core employees. These workers are monitored under specific government regulations and guidelines in which the client must be fully informed and compliant in areas such as: accurate classification, behavioral management practices, financial, tax treatment, benefits, ERISA programs as well as rights under Title VII including discrimination. There are some risks associated with each group but most are minimized through strict adherence to processes and agreements between supplier and client. However, there gaps where the risks are higher and the responsibilities of compliance fall squarely on the shoulders of the client.
In general there are four groups of workers to consider; each is ranked below according to level of risk starting from lowest to highest risk:
- Recruited Temporaries: individuals that are recruited, screened, tested and placed by an agency that employs the temporary in a W-2 relationship.
- Payrolled Workers: individuals identified and selected by the client that need a W-2 payroll structure through a third party employer for tax purposes for the duration of the project.
- Service Providers: Companies or Corporations that provide individuals in order to perform the services outlined in a service contract.
- Independent Contractors (consultants, freelancers): any individual entity that does not have taxes withheld and receives a 1099 Form for services rendered.
Misclassifications or weak controls of these groups can result in tax penalties and assessments from a variety of Federal and State agencies, as well as increased exposure to co-employment risk. Our risk assessment audit helps companies determine the adequateness, adoption, and adherence of company policies and procedures for the management of contingent labor. In addition, we help companies quantify the potential exposure or liability with inadequate or non adherence to the company’s policies and procedures.