How does classifying your employees affect payroll?

Asked 2 years ago

I have started the process of becoming an employer and I have all my team members' information and documents. I don’t see why I need to classify whether my employees are independent contractors or employees; it’s obvious. I have their bank details, I know how much I’m paying everyone, and my business is still fairly new, so I know everyone's employee status.

Administering payroll Payroll process Payroll compliance

Jadiel Macdonald

Saturday, August 20, 2022

Classifying your workforce as employees or independent contractors influences the taxes assessed on their earnings, the payroll taxes you owe, and employees' eligibility for things like overtime. As an employer, you owe payroll taxes only on your employees' earnings. Failing to classify your workforce properly could result in back taxes, penalties, and interest. 