What legal requirements associated with employing staff do companies avoid by classifying workers as independent contractors?
Answer
Withholding income and payroll taxes, providing health insurance, or paying unemployment insurance
The classification of workers as independent contractors provides substantial administrative and financial relief for the hiring entity by eliminating responsibilities tied to formal employment. Specifically, these companies avoid the legal obligations of withholding income and payroll taxes (FICA), as well as the costs associated with providing employer-sponsored benefits such as health insurance or contributing to unemployment insurance funds for those workers. This avoidance of standard employment overhead is a major implication of the contractor model.
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