New research shows benefits of a four-day work week
Economist and professor Juliet Schor discusses her new book 'Four Days a Week: The Life-Changing Solution for Reducing Employee Stress, Improving Well-Being, and Working Smarter'.
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Forbes
5 days ago
- Forbes
Employees Or Independent Contractors? How To Classify Workers
A business' tax and benefit obligations are limited when a worker is a contractor. But misclassification can be costly. getty When you're a small business, you may not have the resources (nor the need) for a full-time staff. You might choose to have one or two employees who work part-time, one or two who work full-time, or, depending on your circumstances, you might fill in the gaps seasonally by hiring temporary employees. From a tax and employment law perspective, all of them could potentially be your employees. Sometimes employers assume that only full-time, permanent workers are employees. This is not true. Employees can be full-time or part-time, seasonal or year-round, temporary or permanent. The question of how to classify workers as employees versus independent contractors depends on many factors, but the length of employment is not one of them. What distinguishes an employee from an independent contractor? If a worker is an employee, the employer has certain tax obligations on behalf of the worker. In contrast, an employer does not withhold any payroll taxes, including Social Security and Medicare taxes, nor does it pay the employer portion of those taxes for an independent contractor. The Internal Revenue Service (IRS) says that the general rule is that an individual is considered an independent contractor if the person paying for the work has the right to control or direct only the result of the work, not the manner in which it is done. Or, to put it simply, it's a question of control: The more you control the terms of the employment, the more likely it is that you are an employer. Obviously, control is relevant and cases are fact-specific. In an effort to clarify this, in 1987, the IRS developed a list of 20 factors to be considered. Those were memorialized in Revenue Ruling 87-41. (A revenue ruling is an official interpretation by the IRS of the Internal Revenue Code, related statutes, tax treaties, and regulations, and indicates how the IRS believes the law should be applied to a specific set of facts.) The 20 factors identified by the IRS in Revenue Ruling 87-41 are listed below. The more the answer to each question is yes, the more likely it is that the worker is an employee and not an independent contractor. Of course, that list isn't written in stone, just in a Revenue Ruling. Some of this is subjective, and there's no magic number of times you can answer yes that conclusively determines the outcome. Since that time, the IRS has updated its checklist to three categories of factors to be used alongside the 20 questions. For IRS purposes, as an employer, you must weigh all these factors to determine whether a worker is an employee or an independent contractor. The IRS also has a helpful section on its website that provides examples and definitions. So is this just about a paycheck? Not at all. Employers have different obligations towards employees than they do towards independent contractors—and that extends beyond tax obligations. For example, an employer is not responsible for providing the same benefits and tax-favored opportunities, such as health care insurance and retirement plans, to an independent contractor that they provide to those workers who are considered employees. An employer is not required to offer stock options or other incentive plans to an independent contractor. And when an independent contractor leaves, for whatever reason, there is generally no severance or unemployment compensation payable. In short, an independent contractor is, well, independent. Worker classification can also impact wages and overtime pay. That's why, as part of its efforts to address worker misclassification, the Wage and Hour Division of the Department of Labor (DOL) published a final rule, effective March 11, 2024, revising its guidance on how to analyze whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). Additional information is available on the DOL website. Worker misclassification issues aren't limited to small businesses. Several high-profile companies, including Microsoft, Time Warner, and Lyft, have faced court cases over allegations of worker misclassification. Perhaps the most famous case involved FedEx, which was accused of classifying and paying its drivers as independent contractors for years (when they should have been classified as employees). After extensive litigation in multiple states, FedEx paid nearly half a billion dollars in settlement payments for misclassification. What happens if you do it wrong? As court cases around the country have demonstrated, if you erroneously classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. Depending on circumstances, you may be required to retroactively apply benefits. If you have concerns, you can get out in front of the problem. If you want the IRS to make a determination, you can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. (The form may be filed by either the business or the worker.) The IRS will review the facts and circumstances and officially determine the worker's status. But it's not quick: it can take at least six months to get a determination. If you've misclassified a worker as an independent contractor, but you have a reasonable basis for doing so, you may qualify under a safe harbor for tax relief. The relief, sometimes referred to as section 530 relief, requires you to meet certain criteria, including treating the worker consistently for filing obligations (for example, you filed Form 1099-NEC for a worker you considered an independent contractor). You must also have treated similar workers as independent contractors. The IRS also offers a Voluntary Classification Settlement Program (VCSP) that allows employers to reclassify workers as employees for future tax periods and obtain some tax relief. To participate, a business owner must meet certain eligibility requirements (similar to those for section 530 relief).
Yahoo
03-06-2025
- Yahoo
New research shows benefits of a four-day work week
Economist and professor Juliet Schor discusses her new book 'Four Days a Week: The Life-Changing Solution for Reducing Employee Stress, Improving Well-Being, and Working Smarter'.
Entrepreneur
02-06-2025
- Entrepreneur
4-Day Workweeks Lead to More Revenue, Less Burnout: Study
Working one day less per week improved revenue, retention, and employee health, according to a new study. Adopting a four-day workweek can improve employees' mental health and boost a business's bottom line, according to a new study. After studying over 245 businesses and nonprofits that have piloted a four-day workweek in their organizations over the past three years, Boston College economist Juliet B. Schor, also a lead researcher at 4Day Week Global, wrote in The Wall Street Journal that working one day less a week resulted in health benefits for employees. Nearly 70% of workers reported reduced burnout, over 40% experienced better mental health, and 37% saw better physical health. Related: 'Love It!': A Town in Connecticut Is Experimenting with a 4-Day Workweek — and It Seems to Be Working The pilot programs have reached 8,700 employees around the world, including the U.S., U.K., Brazil, and Ireland, and have lasted for at least six months at each company. On the employer side, the majority of organizations that piloted a four-day workweek noticed improved bottom-line metrics, including increased revenue and dwindling resignations. The results were so clear that over 90% of the more than 200 companies that started a six-month trial by June 2023 were still on a four-day workweek schedule a year later. Cloud computing provider Civo, which has 84 employees according to PitchBook, piloted the four-day week in 2020 and implemented it as company policy in January 2021. Civo CEO Mark Boost told The Register in April that the company has continued a four-day workweek for the past four years after positive feedback from staff and no decline in productivity. "Every employee is on a four-day week and most employees opted for Fridays off, which gives them a three-day weekend," Boost told The Register. Kickstarter also works on a four-day week, which started as a pilot program in 2021. Employee engagement is up 50% as a result. Kickstarter CEO Everette Taylor told Kevin O'Leary in July that employees are "very productive" within their four days of work per week. Related: This Country Just Implemented a 6-Day Workweek for Employees However, a four-day week can have disadvantages. According to the BBC, reducing the workweek by a day can lead to a more intense workload on the remaining four days, potentially causing more employee stress. In 2019, Microsoft Japan gave its 2,300-person workforce five Fridays off in a row in August without cutting their pay. The four-day workweeks led to 40% more productivity, with employees taking off 25% less time during the trial, according to the study. Despite the promising findings, Microsoft ended the program after trialing it without giving a reason for not implementing the four-day workweek as a permanent policy. Still, a recent survey shows that more than three in five U.S. employees want a four-day workweek, even if they have to work longer hours. The survey, released by LiveCareer in January, polled 1,130 Americans about their thoughts on a four-day workweek, working 10-hour days. Nearly 70% of employees supported a four-day week, predicting that it would make them more productive and lead to better work-life balance.
