One of the hottest topics in the HR world currently is that of independent contractors and whether they are misclassified and should be employees. Although there are loads of test to help you figure that out, the problem is that there are too many tests from too many sources and many employers get confused and don’t want to wade through all the documentation. Although it’s not the only source, one of the best ways to get an idea if you have a problem on your hand is to take a look at the following questions that come out of the Internal Revenue Service 20-Factor test. Although the 20-factor test has been updated in recent years to become an 11-factor test, this test is still very relevant.
|Do you have control on determining
when, where & how work is done?
|A worker who is required to comply with other
persons’ instructions about when, where, and how he or she is to work is
ordinarily an employee. This control factor is present if the person or
persons for whom the services are performed have the right to require
compliance with instructions
|Do you provide company training to
|Training a worker by requiring an experienced
employee to work with the worker, by corresponding with the worker, by
requiring the worker to attend meetings, or by using other methods, indicates
that the person or persons for whom the services are performed want the
services performed in a particular method or manner.
|Is the work performed by the worker
a key part of your business operation?
|Integration of the worker’s services into the
business operations generally shows that the worker is subject to direction
and control. When the success or continuation of a business depends to an
appreciable degree upon the performance of certain services, the workers who
perform those services must necessarily be subject to a certain amount of
control by the owner of the business.
Services Rendered Personally
|Do you insist that one particular
person perform the work?
|When an employer is insisting that a particular
person perform the work, it can be strongly assumed that the work performed
is being controlled by the employer. However, when the worker retains control
over such things as hiring, supervising & paying helpers, the situation
looks more like an independent contractor relationship.
|Do you hire, supervise and pay a
|If the person for whom the services are
performed hires, supervises, and pays assistants, that factor generally shows
control over the workers on the job. However, if one worker hires,
supervises, and pays the other assistants pursuant to a contract under which
the worker agrees to provide materials and labor, and under which the worker
is responsible only for the attainment of a result, this factor indicates an
independent contractor status.
|How long have you employed the
|The longer the business relationship continues, the more likely the
worker is an employee. The shorter the business relationship continues, the
more likely the worker is
an independent contractor.
Set Hours of Work
|Do you require the worker to work
certain hours at your worksite?
|The establishment of set hours of work by the
Employer is a factor indicating control and therefore strongly indicating the
person is an employee. The more a worker has control over their hours and
work schedule indicates an independent contractor.
Full Time Work Requirements
|How much time do you require the
worker to devote to your operation?
|If the worker must devote substantially full
time to the business of the person for whom the services are performed, such
person has control over the amount of time the worker spends working and
impliedly restrict the worker from doing other gainful work. An independent
contractor, on the other hand, is free to work when and for whom he or she
Working on Employer Premises
|Must the worker perform work
activities at your physical business location?
|If the work is performed on the premises of the
person for whom the services are performed, that factor suggests control over
the worker, especially if the work could be done elsewhere. Work done off the
premises of the person receiving the services, such as at the office of the
worker, indicates some freedom from control. However, this fact by itself
does not mean that the worker is not an employee. The importance of this
factor depends on the nature of the service involved and the extent to which
an employer generally would require that employees perform such services on
the employer’s premises. Control over the place of work is indicated when the
person or persons for whom the services are performed have the right to
compel the worker to travel a designated route, to canvass a territory within
a certain time, or to work at specific places as required.
Order or Sequence Set
|Does the worker need to follow your
business process or do they have the flexibility to decide how to accomplish
|If a worker must perform services in the order
or sequence set by the person for whom the services are performed, that
factor shows that the worker is not free to follow the worker’s own pattern
of work but must follow the established routines and schedules of the person
for whom the services are performed. Often, because of the nature of an
occupation, the person for whom the services are performed does not set the
order of the services or sets the order infrequently. It is sufficient to
show control, however, if such person or persons retain the right to do so.
|Do you require the worker to submit
|A requirement that the worker submit regular or
written reports to the person for whom the services are performed indicates a
degree of control.
|How do you pay the worker?||Payment by the hour, week, or month generally
points to an employer/employee relationship. Another strong indication that
the worker is an “employee” is when the employer provides benefits such as
insurance to the worker. An independent is
generally paid by the job, project, assignment, etc., or receives a
commission or similar fee and has his/her own established benefits program.
|Do you reimburse the worker for
business and/or travel expenses?
|If the employer ordinarily pays the worker’s
business and/or travel expenses, there is a strong indication that the worker
is an employee. An employer, to be able to control expenses, generally
retains the right to regulate the worker’s business activities.
Tools & Materials
|Are you providing the worker with
an office, internet, computes, tools to accomplish work?
|The fact that the person for whom the services
are performed furnishes significant tools, materials, and other equipment
tends to show the existence of an employer-employee relationship.
|Does the worker have their own
office facilities to conduct business besides your office?
|If the worker invests in facilities that are
used by the worker in performing services and that are not typically
maintained by employees (such as the maintenance of an office rented at fair
value from an unrelated party), that factor tends to indicate that the worker
is an independent contractor. On the other hand, lack of investment in
facilities indicates dependence on the person or persons for whom the
services are performed for such facilities and, accordingly, the existence of
an employer-employee relationship. Special scrutiny is required with respect
to certain types of facilities, such as home offices.
Realization of Profit or Loss
|Does the worker receive set wages?||An employee may be rewarded,
disciplined, demoted or fired depending on their job performance; However, an
independent contractor can realize a profit or incur a loss from his/her
Working for More than One Business
|Does the worker perform work for
other people besides you?
|If a worker performs various services for a
multiple of unrelated persons or firms at the same time, that factor
generally indicates that the worker is an independent contractor. However, a
worker who performs services for more than one person may be an employee of
each of the persons, especially where such persons are part of the same
Availability of Worker’s Services
|Does the worker offer his/her
services to the public?
|The fact that a worker makes his or her
services available to the general public (e.g., internet, newspaper, TV
advertisement) on a regular and consistent basis indicates an independent
Employer’s Right to Fire Worker
|Can the worker be fired “at will”
or does he/she have a contract with term and requiring him/her to produce certain
|The right to discharge a worker is a factor
indicating that the worker is an employee and the person possessing the right
is an employer. An employer exercises control through the threat of
dismissal, which causes the worker to obey the employer’s instructions. An
independent contractor, on the other hand, cannot be fired so long as the
independent contractor produces a result that meets the contract
Worker’s Right to Quit
|Can the worker end the working
relationship without any liability?
|If the worker has the right to end his or her
relationship with the person for whom the services are performed at any time
he or she wishes without incurring liability, that factor indicates an
employer-employee relationship as opposed to a contractual relationship that
specifies a term beginning and end date.