As long as the client approves those expenses, then the contractor is paid. The receipts are logged and then go to the business owner with the contractor’s timesheet each week. Contractors can upload receipts to their digital portal when they have them.
We offer our clients a full travel and expense reimbursement feature within our platform. Then there are issues for you to comply with corporate taxes.Ĭompanies seeking new ways to handle the frustrating complexities of contractor reimbursement can always turn to FoxHire. The rules you must follow vary between states, so if you’re using contractors based in multiple states, you must track any regulatory changes and follow specific rules or run the risk of being fined.
Whether it’s a payment for services rendered or the reimbursement of an expense, this is an area of labor law and taxation that remains complex and ever-changing.Ĭompanies struggle in this area, especially if they’re a small business and reimbursing within a manual process. Just one of the complexities within the snarl of laws regulating the employer/employee relationship is how you handle contractor reimbursement. Just ask Microsoft, who reached a settlement of $96.89 million, then had to pay another $27.13 million in legal fees because they misclassified their labor pool. One thing that is established is that companies will be fined big money if they get this wrong. HR teams are trying to stay on top of these changes, but the tests for whether a worker is a contractor or an employee are still being set. The IRS and the Department of Labor have standards, but state courts and lawmakers have added nuances-and the rules are still evolving. One of the most basic rules of the employer/worker relationship is how the employee is classified. Whether other states will follow suit remains to be seen, but in the meantime, companies that had never provided reimbursement before had to scramble to set up systems to handle the influx of receipts and payments that the law forced upon them. Have you heard about California’s new Assembly Bill 5? At the beginning of 2020, the state reclassified many independent contractors as employees and required that many companies provide reimbursement for things like vehicle mileage. The Complexities of Contractor Reimbursement Here’s the problem and how an employer of record could help. Reimbursing employees is difficult enough companies struggle even more with organizing around contractor reimbursement.
One of the complexities inherent in working with contractors is how to reimburse them for expenses. Today there are 10 to 15 million contractors working in the U.S. Contracting is the new black of employment models.