Employee Classification
Definition
The legal distinction between types of workers, such as exempt vs. non-exempt or employee vs. contractor.
What is Employee Classification?
Employee classification defines how workers are treated under labor laws. Key classifications include:
- Exempt vs. Non-Exempt (FLSA)
- Independent Contractor vs. Employee (IRS/DOL)
- Full-time vs. Part-time
Why is Employee Classification Important for Employers?
Accurate employee classification supports fair pay, tax compliance, and proper benefits administration. Getting it right helps employers:
- Avoid wage and hour discrepancies
- Properly manage overtime obligations
- Stay compliant with tax regulations
- Reduce benefits eligibility errors
FAQs
Is salary the only factor for exemption?
No. Job duties must also meet the DOL’s exempt criteria.
Can I give a 1099 form and avoid taxes?
Only if the worker is truly an independent contractor, as misuse leads to penalties.
How ExtensisHR Can Help
We guide clients in proper classification based on:
- Job duties and salary thresholds (for FLSA)
- Control and independence tests (for contractors)
- State-specific rules