The employment ecosystem has changed radically in a number of years, with more independent contractors working than ever before. The freelance economy can benefit individuals and businesses alike. Freelancers enjoy unparalleled flexibility and control over their careers. Companies have the opportunity to hire top talent from all over the globe without the overhead costs or long-term commitment associated with onboarding a full-time employee. As freelancing transforms the way we work, it also brings with it new questions about traditional processes—ones related to compliance and your company’s daily operations.
To operate legally, businesses must follow the relevant laws and regulations governing them. Compliance refers to how well a company meets those legal obligations. Obtaining a business license and paying taxes are common examples of compliance. Government authorities at every level set laws, but it’s also important to be aware of other factors. Where your business is based, how it’s structured, what industry it’s in—these varying aspects come with varying requirements.
From the local to international levels, government authorities and industry-specific organizations each have various regulations in place to make sure independent contractors are classified correctly, that their worker rights are protected, and that the right taxes are collected. That means you need to know a number of different rules to stay in compliance at every level. It also means that the rules can sometimes get confusing.
One of the most important considerations? Classification. Are your workers employees or independent contractors?
The DOL uses the ABC Test, only considering an individual an independent contractor if all three factors are met:
For employment tax purposes, the Internal Revenue Service (IRS) uses a similar common law test examining the degree and control of independence:
As the freelance economy has expanded in recent years, the question has become more complicated for state and federal governments. As presidential administrations have changed, so have the DOL’s guidelines for worker classifications. Most states use either the ABC test or the common law test, but some states, like California have their own test variations and laws to classify workers. Local governments sometimes have their own laws too—New York City adopted the Freelance Isn’t Free Act in 2017 to enhance protections for freelancers. And if you have an international team, then you not only have to be aware of other countries’ compliance laws, but also have to submit the right paperwork for tax filing purposes.
As your business grows, your compliance responsibilities regarding your workers grow too. With all of the fluctuation in various standards and legislation, remaining compliant can feel tedious and daunting—but it’s always important. And there are a few basic steps you can take to ensure you comply with all of the rules:
With multiple levels of government regulations and ever-changing legislation, following compliance laws can quickly become a source of stress and overwhelm. But with the right tools, you can keep your business compliant—and do so with ease.
That’s why Rise’s Pay Platform has a built-in compliance layer for independent contractor engagements. Onboard talent. Create customized pay schedules (fixed, hourly, one-offs) with frequencies to fit your needs. Fund your entire payroll on time, every time. And to simplify your payment processes, Rise acts as a third party agent. We handle the paperwork so you don’t have to. Centralize everything: contingent workforce, payments, compliance, and contracts.
We know innovative work needs tools made for the future, not built from the past. Our all-in-one hub is designed with the freelance economy in mind. And it’s all waiting for you on Rise.