Thinking About Switching Employee Classifications?

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TSheets is useful for every type of worker you have

Just like coloring books, onesies, rompers, and Nerf guns aren’t just for kids, accurate time tracking isn’t just for hourly employees.

At TSheets, we’ve talked at length about the detriments of misclassifying employees (it’s one of seven deadly sins) according to FLSA regulations. So while it might be commonplace to believe only hourly employees are supposed to track time at work and submit timesheets, the practice of time tracking applies to all employee classifications.*

 

There’s No Harm in Misclassifying Employees, Right? Think Again.

While you could turn to Uber for the pitfalls of misclassifying employees, let’s look at another example: We once spoke to a business owner who reclassified his employees to 1099 contractors. His reason? The workers’ compensation premium for two employees was between $15,000 and $20,000 per year, and in order to have employees waive the workers’ comp, it would cost the company $50 per person, but the company wouldn’t have to worry about taxes, workers’ comp or any other HR items.

Overall, this route may have seemed cheaper and easier for the company, but it could also severely damage the company’s bottom line in the long run, as misclassifying an employee could lead to a very costly lawsuit.

As you consider how you need to classify employees, there are a few important tips to keep in mind, including how time tracking supports each classification. Misclassification can be expensive, and how you classify your employees is never worth taking a chance on.

 

Benefit of Time Tracking for Hourly Employees

Hourly employees are considered nonexempt employees. They are eligible for overtime wages and are typically paid by the hour.

  • More accurate timesheets save you money. TSheets tracks your hourly employees and prevents time theft, which often occurs in the form of false timesheets, employees estimating time worked, and buddy punching.
  • Teams are within reach. TSheets cloud-based time tracking provides a closer look at what the workforce is capable of on any given workday. Using the mobile time tracking app, employers can verify employee locations via GPS, so managers always know who is working where.
  • Save time on payroll. TSheets also automatically tracks hours and syncs up with payroll systems like QuickBooks and Gusto to ensure any overtime is accounted for.
  • Store sensitive records in TSheets. The FLSA requires businesses to keep employee time data for two years. TSheets does that for you!

 

Benefits of Time Tracking for Salaried Employees

The United States Department of Labor (DOL) considers employees exempt from overtime, assuming that they earn more than the overtime threshold (currently set at $23,660) and their jobs don’t fall within one of the exceptions to the salary threshold based on certain tests regarding their job duties as defined in FLSA guidelines. These employees are usually paid on a salary (or a regular, fixed-payment) basis.

Employers are not required to provide overtime wages unless employee wages fall below that threshold. Most salaried employees earn more than that, but if the law changes in the future, these employees won’t automatically be considered exempt.

  • Better allocate resources. High-level tracking of the time spent on certain projects helps a company better understand how to allocate resources and compare productivity between employees.
  • Track accruals. Benefits administrators can track accruals and usage of paid leave and more easily track compliance with the Family Medical Leave Act.
  • Classify correctly. Accurate records help employers in the event an employee claims that they should be classified as nonexempt based on their specific job duties and classification.

 

Benefits of Time Tracking for Independent Contractors

According to the IRS, an independent contractor (commonly known as a “freelance worker”) is someone who is in business for themselves and provides their services to other businesses. As a result, independent contractors generally do not have income taxes withheld from their earnings.

Contractors are not “employees,” and if you impose the same rules and restrictions on contractors as you do employees (hours required to work, where and when they work), you could find yourself in deep with a lawsuit.

With contractors, you do not determine how they work as long as they adhere to the conditions of the contract. If you have a fixed-fee contract an independent contractor, this could mean you pay out more on projects without knowing exactly how much work goes into them.

  • Accurate payroll and record-keeping. If you do decide to use contractors in spite of the risks, track as much data possible for each contractor not only to get a feel for the value of their work but so you can ensure you’re paying each contractor the correct amount.
  • Single users and freelancers can get TSheets free. Since many independent contractors invoice their work, you can encourage (though, you can’t require) them to track their time and invoice using TSheets for freelancers and contractors. Not only will their invoices and time data be accurate, but having that data allows you to compensate contractors fairly and create detailed work orders.

The best things in life aren’t useful for just one type of person — time tracking included.

*As always, TSheets does not offer legal advice. Please consult your lawyer or accountant before changing your employees’ classifications.

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