In the business world, the classification of workers plays a pivotal role in determining a range of responsibilities for employers, including tax liabilities, benefits and workers’ compensation. Ohio, as in the rest of the country, classifies workers as either independent contractors or employees.
Understanding the differences between these two classifications can aid businesses in making informed decisions and staying compliant with state laws. This article will detail the key differences between independent contractors and employees in Ohio.
Defining independent contractors
An independent contractor in Ohio operates as a separate business entity. They control the manner in which they perform their work and the outcomes they deliver. Independent contractors provide their own tools and equipment, set their own hours and often have multiple clients. They are not entitled to benefits like health insurance, overtime pay or vacation time from the businesses they work for.
On the other hand, an employee works directly for a business. The employer has the right to control when, where and how the employee performs their work. Employees are typically provided with the tools and equipment needed to perform their job. They are also entitled to benefits such as health insurance, workers’ compensation, unemployment benefits and overtime pay.
Determining worker classification in Ohio
The state of Ohio uses several tests to determine worker classification. These tests examine factors such as the level of control the business has over the worker, the worker’s investment in facilities and equipment, the permanency of the relationship and whether the service rendered is an integral part of the business.
From a tax perspective, businesses withhold income taxes, withhold and pay Social Security and Medicare taxes and pay unemployment tax on wages paid to an employee. For independent contractors, businesses do not generally have to withhold or pay any taxes on payments to independent contractors.
Worker classification affects a host of issues, including tax implications and benefits. Businesses should carefully consider these differences when hiring to ensure they remain compliant with Ohio’s labor laws.