Independent Contractors vs. Employees
Federal law is very clear on when you may classify workers as independent contractors instead of employees. Note the "Services Provided as Key Activity of the Business" clause:
If a worker provides services that are a key aspect of the business, it is more likely that the business will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.
Thus, any dental facility hiring a dental hygienist, a dental assistant, or an administrative worker must treat that person as an employee from day one. This means complying with all laws and regulations that apply to an employer/employee relationship including all payroll taxes and withholdings. There is no "Under $600 Exemption" as that only applies to valid independent contractors.
When you use DMA, Inc. to pay the temp, they are paid as DMA, Inc. employees. As their employer, we handle their payroll and their payroll taxes. We comply with all employment laws and regulations.
Paying Temps Directly
If you pay a temp directly, either as an "Independent Contractor" or "Under the Table", you are in violation of employment law. Beware of agencies who ask you to pay temps directly as independent contractors - it is not legal despite what they may tell you. If the Internal Revenue Service does not get the appropriate taxes from the temp, they will come to you:
Consequences of Treating an Employee as an Independent Contractor
If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker
Misclassified Workers Can File Social Security Tax Form
Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation.
In addition, civil and criminal penalties may apply. Penalties up to $25,000 and one year imprisonment for a first offense, and $50,000 and up to two years imprisonment for a second offense can be imposed.
Treating a Temp as an Employee
Many facilities are aware that under the law they may not pay temps as independent contractors. When a "referral agency" provides a temp, the facility will treat the temp as an employee for the duration of the assignment. While this is legal (assuming all laws and regulations are adhered to), it is certainly inefficient and can expose the facility to risks.
Initial documentation requirements: Treating a temp as an employee means the facility must have the temp fill out an I-9 form and provide the appropriate documentation that the person is eligible to work in the United States (such as a driver's license and a social security card.) Additionally, they must have the temp fill out a W4 form so the temp can be added to their payroll with the correct withholdings. Clearly, this is a large burden to the facility, especially for short assignments.
Employer tax burden: Beyond the initial paperwork required to "hire" a temp, the facility is required to withhold the temp's federal and state income tax (and locality taxes in some states) along with federal and state unemployment. The facility must also pay the employer portion of these taxes.
Employment regulations: When a temp is treated as an employee, they must be considered in all circumstances where federal or state regulations apply to employees.
Workers' compensation: Another problem with treating a temp as an employee is the risk incurred. Facilities may be required to report temps who are treated as employees to their workers' compensation provider, potentially raising the premium. Should there be a work related injury at or involving your facility (such as the repetitive strain injuries common among dental hygienists), the temp could submit a workers' compensation claim, again potentially leading to increased premiums.
Unemployment insurance: When a temporary assignment ends, the temp employee is entitled to file an unemployment claim. As that person's employer, some portion of the unemployment income will come from the facility's unemployment account. An employer's unemployment insurance rate per employee is set based on unemployment claim activity.
Professional Liability (Malpractice) Insurance
When you hire a temp, be sure that your professional liability insurance policy extends to temps working in your office. Most policies do not cover non-employees.
When you use DMA, Inc., to pay the temps, they are covered by our professional liability insurance. This coverage is rare among temporary agencies due to the considerable expense, but we know our clients place tremendous value in knowing they are not exposed to the risk of a non-covered malpractice claim.
Regulatory Compliance and Documentation
Every facility has different requirements from various regulatory bodies. We will not place a temp who has an expired or out-of-state license. DMA, Inc. has sophisticated technology which allows us to track facility documentation requirements and ensure any temps placed meet these requirements. Examples are immunization certificates, radiology certification, criminal background checks, and OSHA certification