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Employee to Consultant
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Employee to Consultant
Discuss employment-law issues such as family leave, overtime, disabilities law, harassment, immigration and termination.
One of our employees is resigning but has offered to stay on as a consultant to help transition the position to a new person. Are there any issues with this?
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Forums » Topic Forums » Legal Forum » Employee to Consultant
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Employee to Consultant
posted at 6/9/2010 10:26 AM EDT
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Posts: 1771
First: 10/24/2002 Last: 9/14/2011 |
Assuming that you mean "independent contractor" when you say "consultant" -
If the person will be doing the same thing in the consultant role as he was doing in the employee role, then you will have illegally misclassified him as an independent contractor. Legally, a job is either IC work or employee work - one never becomes the other just because a person wants it that way. |
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Employee to Consultant
posted at 6/9/2010 2:06 PM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
However, you are more than able to classify him or her as an hourly employee if he/she won't meet the minimum pay under the exempt status (assuming the original position was exempt).
And the hourly rate could be higher than a current hourly rate. But I agree that it would NOT meet any IC tests. |
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Employee to Consultant
posted at 6/16/2010 6:08 AM EDT
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Posts: 1771
First: 10/24/2002 Last: 9/14/2011 |
If an individual is performing work for an organization and is being paid for said work via the accounts payable function, then under the law, this individual is an Independent Contractor - no matter what the individual or organization calls the individual.
In your case, if this Consultant is going to be paid via accounts payable, then this Consultant is an Independent Contractor as defined by law. |
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Employee to Consultant
posted at 6/16/2010 10:31 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
": If an individual is performing work for an organization and is being paid for said work via the accounts payable function, then under the law, this individual is an Independent Contractor - no matter what the individual or organization calls the individual.
In your case, if this Consultant is going to be paid via accounts payable, then this Consultant is an Independent Contractor as defined by law." Agree with hrbth and want to add that if paid via AP, then no payroll taxes are taken out or owed. HOWEVER, many companies misclassify employees as IC to avoid said payroll taxes. So before you decide to classify the consultant as an IC, you need to make sure it falls under the IRS and DOL's IC rules...which are pretty strict. Especially if the person is going to be doing the same job functions, has no true financial stake in the project (beyond wages/pay), and doesn't "consult" for other companies. |
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Employee to Consultant
posted at 6/16/2010 10:36 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
...and sets their own work schedule, uses their own equipment (eg computers), doesn't do work normally done by regular employees, doesn't take direction from company management - in short, has total control over deliverables except for meeting agreed upon delivery dates and deliverable specifics. If all that's true, then the person would meet the IRS definition of an independent contractor. If it's not the case, then you'd be best off keeping the person on your payroll and paying by the hour. |
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