Employee Type

What Are Employee Types—and Why Do They Matter?

Employee types are the different classifications or categories of workers based on their employment status and relationship with their employers in the United States. There are several employee types that are recognized and defined by laws and regulations, and these classifications of employees help determine the various rights, benefits, and obligations of both employees and employers.

Determining employee types is primarily the responsibility of government agencies and labor laws. For instance, the US Department of Labor and the Internal Revenue Service (IRS) play a significant role in defining and enforcing employee classifications.

One main reason for this system is to ensure that employees receive certain protections and benefits, such as minimum wage, overtime pay, and access to certain benefits like health insurance and retirement plans. It also helps employers understand their responsibilities and obligations towards their employees, such as paying payroll taxes and providing a safe working environment.

While some federal laws and regulations apply to all employee types across the United States, it’s important to note that certain aspects of employee classification may vary by state. Some states have other labor laws and regulations that provide additional protections or requirements for employees and employers. Therefore, businesses need to be aware of and comply with federal and state-specific employment laws to properly classify their employees and fulfill their legal obligations.

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The 12 Most Common Types of Employees

1. Full-Time Employees

2. Part-Time Employees

3. Independent Contractors

4. Temporary Employees

5. Subcontractors

6. Tenured Employees

7. At-Will Employees

8. Leased Employees

9. Job-Share Employees

10. Apprenticed Employees

11. Journeyman/Master

12. Interns

How to Avoid Employee Classification Mistakes

Employee classification refers to the process of correctly categorizing workers based on their employment status. Misclassifying employees can have serious ramifications—it is important for employers to accurately classify their employees to comply with labor laws and avoid potential risks and consequences.

Misclassification can result in legal trouble for employers. This often comes as misclassifying employees as independent contractors while defining schedules and hours worked. This is a problem when workers are entitled to overtime or healthcare benefits and aren’t receiving them because of how they’re classified.

Classification has made news in the past years as state governments work to define gig workers for companies like Uber, DoorDash, and Instacart. These companies hire drivers as independent contractors, but they are subject to termination without notice since they fulfill the core functions of the business. Because the contractors were being treated as employees and not contractors, they were entitled to the full protections and benefits that come with being classified as employees and have to comply with company policies to avoid termination.

Companies that are found to have misclassified employees could be liable for paying back wages, unpaid taxes, and additional penalties. These costs can be substantial.

To avoid employee classification mistakes, here are some actionable tips to keep in mind:

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