Independent Contractor Compliance Blog

In the last segment I referred to tracking the spending and cost of your project to avoid entering the Land of Status Drift. There’s another “Do” you should know that will warn you when your IC’s status is in danger.

Do track the progress of the project

This is not just a safe practice for IC versus employee status, it’s also a good management tool. However, from an IC status perspective, tracking the progress of the project to insure it doesn’t fall victim to project drift is vital. Project drift is the first step towards status drift, which is your passport to the Land of Status Drift. You should become wary when the consultant begins to perform tasks not specifically spelled out as a deliverable in their contract.

Most of the time these tasks are reasonable

Many times these extra tasks are “nice to haves”…the extra bells and whistles. Once you begin to add these little side jobs you most likely have purchased your ticket to the Land of Status Drift. Luckily, you haven’t crossed the border yet. Many projects approach the border but still remain on the IC side. A few bells and whistles will not make your IC an employee.

When do you actually migrate to the Land of Status Drift?

A consultant who is doing a variety of jobs, not spelled out in the contract, for an extended period of time is beginning to look suspiciously like an employee. The longer this occurs, and the more variety of jobs the consultant does outside the scope of the contract, the greater the danger of the IC becoming your employee.

How do you know when you are in the Land of Status Drift?

You can recognize the Land of Status Drift when you have an IC whose job goes on for an extended period of time. This can happen even if you draw up a new contract for each job. Slowly, you have settled into a comfortable relationship with the IC and are treating him/her more like an employee than a independent consultant. By this time the consultant is no longer so independent. Some clues – they may:

• Have become financially dependent on your projects-excluding other clients
• Have a cubicle along with your employees
• Attend your regular staff meetings
• Report in regularly for assignments
• Take on side jobs
• Even be helping your staff plan the year-end party, etc.

This person is looking very much like an employee. You have now arrived.

Welcome to the Land of Status Drift. The IC’s status has drifted to W2. The problem is you are still paying him/her like a 1099 and (not) providing them with the same benefits as your W2 employees. You are at risk.

What’s Next?

In the next segment I will cover a few “Don’ts” you should be aware of and how ignoring them can almost guarantee your IC becomes a misclassified worker.