Employee Benefits that Mean Your Worker is an Employee

Reading Time: 3 minutes

If you provide your workers with the employee benefits described in this article, you should classify them as employees.

Often it’s hard to know whether or not a worker should be classified as an employee or independent contractor. Yet, this is important to get right as misclassifying a worker leads to expensive tax consequences. With that said, there are a few key indicators a worker is indeed an employee and not an independent contractor. Read on to find out more.

Health Insurance

Many employers pay part of, or all of, an employee’s health insurance. In addition, employees have the option to add spouses and dependents to their health insurance plans. The payments made by the employer that contributes to the cost of health insurance are not considered wages. Therefore, they are not taxed. A worker is typically classified as an employee if the company they work for pays for a part, or all of, their health insurance plan.

Unemployment Insurance

In the event an employee loses their job, they are likely eligible for unemployment insurance. Eligibility for unemployment is determined by state law within the guidelines of federal law. Unemployment insurance is paid for by employers for each employee. Therefore, if a company is paying unemployment insurance tax for a worker, that worker should be classified as an employee.

Workers Compensation

Workers’ compensation, also known as workers’ comp, is a type of insurance for employees. Employers pay to insure their employees with workers’ compensation in the event that a worker is injured or gets ill while on the job. Workers’ compensation insurance pays for medical costs and other costs associated with the injury or illness that occurred while on the job. Therefore, a worker is classified as an employee if their employer pays workers compensation insurance for them.

Please refer to the following article for a more detailed overview of worker classification, Is My Payee an Employee or Non-Employee?

Fringe Benefits

Fringe benefits include cars, flights, vacations, discounts on services, memberships to country clubs, etc., that companies provide to employees. These benefits are typically included with the employee’s gross income. However, there are some exceptions. Therefore, a worker is should be classified as an employee if a company is providing them with fringe benefits.

Submits Expense Reports

Typically, an employee who travels for work and incurs expenses using their own money for work-related activities is entitled to expense reimbursement from their employer. To receive this reimbursement the employee creates and submits an expense report with details of each expense and records of the receipts. Therefore, a worker asked to submit expense reports to receive expense reimbursement (from, for example, a business trip) should be classified as an employee.

In many cases, independent contractors are required to submit detailed expense reports as part of their agreement with the hiring company. However, this is not the same as an employee receiving reimbursement from their employer for expenses incurred while doing their job.

A reliable and easy-to-use expense tracker is recommended in both cases. Falcon Expenses makes a great app, which makes entering expenses, scanning receipts, creating expense reports, and tracking mileage super easy. Definitely check it out.

About Falcon Expenses

Falcon Expenses is a top-rated expense and mileage tracker app for self-employed and small businesses to track expenses and tax deductions. Falcon customers record $6,600, on average, in annual tax deductions. Get started today. The longer you wait, the more tax deductions you miss.

Automatically track mileage expenses and expenses, keep an odometer log, receipt vault and log billable hours. Quickly organize expenses by time period, project, or client. Easily create expense reports and mileage logs with your expense data to email to anyone in PDF or spreadsheet formats, all from your phone. Falcon’s expense report template is IRS compliant. Use for keeping track of tax deductions, reimbursements, taxes, record keeping, and more. Falcon Expenses is great for self-employed, freelancers, realtors, delivery drivers, couriers, business travelers, truckers, and more.