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3 Costly Lessons Learned from Misclassifying Contractors

By December 26, 2017 November 13th, 2019 No Comments
Maintaining Compliance: 3 Costly Lessons Learned from Misclassifying Contractors

Imagine being paid out for 13 years’ worth of vacation time. It may sound unrealistic. However, this recently happened to a UK man whose working status was misclassified by his previous employer. Conley King, a window salesman in the UK, is currently engrossed in a legal battle with The Sash Window Workshop Ltd. He claims to not have received a paid holiday for 13 years.

In this specific case, the EU courts ruled in favor of King. So, how did this happen?

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King worked for the firm on a self-employed basis, which was agreed upon by both the company and King. However, after King was dismissed from the company, a UK tribunal ruled that Mr. King should have been classified as an employee. This lawsuit could potentially set the employer back 27,000 Euros.

As you grow your business internationally, it’s crucial to properly address your global workforce, and manage them according to specific compliance regulations. Follow these three tips to save yourself from potential headaches—and possible fines—down the road.

1. Classify Your Workers Correctly

In the case of Conley King, his employer miscategorized him as self-employed when he should have been classified as an employee of the company. Due to this misclassification, King was not receiving paid holiday time annually when he should have been.

More and more lawsuits like these continue to pop up regarding employer misclassifications. Consider the agreement you have created with your international workers, the benefits they should or should not be granted, and local labor laws that may affect them. And don’t let the thought of establishing a foreign entity scare you into simply calling them a contractor. Solutions like International PEO can help get employees up and running quickly—and legally.

2. Keep Your Employees Compliant

For King, even if he classified himself as self-employed, his employer still had the ability to correctly classify him early on. This could minimize the risk of possible back-pay for legal benefits.

Compliance regulations can add complications to your international hiring, as each country has different rules and regulations to abide by. It is crucial to stay up-to-date on local labor laws and compliance regulations, and ensure you’re implementing the right policies. As you grow your business into international markets, it’s important to keep up with these ever-changing regulations to avoid hurdles down the road.

3. Align Your Workers, Projects, and Timelines

Since King consistently worked for his employer as a salesman for an extended period of time, it would have been in both his and his employer’s best interest to discuss his position’s longevity upfront. However, his employer lumped his responsibilities into the “gig” class, where workers get paid for the “gigs” they complete.

The gig economy offers limited rights for workers, including zero protection against unfair dismissal, rights to redundancy payments, or rights to receive the national minimum wage and paid vacation/sick days.

Consider what you need to accomplish in your new global markets. Then, categorize these responsibilities accordingly as either short-term projects or longer-term work. This will not only help you flexibly expand your global workforce, but also keep your contractors and employees operating legally and compliantly. 

The Importance of Staying Compliant

Implementing a successful global expansion begins with having the right people in place. At first glance, global contractors may be appealing; however, there are many complications and risks associated with them including misclassifications, which can lead to fines and penalties.

Work with a global expansion partner to help alleviate the headaches that can come with international hiring and seize the opportunity for a successful overseas expansion. Get in touch with our team today for more information.