Is your company a seasonal business? Do you need to hire extra staff for the holidays or tourist season? If you do, remember that hiring seasonal workers involves following a few rules. Many of the laws and regulations that apply to full-time employees also apply to seasonal or part-time employees. Read on to learn a few things to keep in mind as you plan your seasonal workforce.
Independent contractor vs employee:
Law for contractors (independent contractor taxes):
Independent contractors are basically self-employed individuals who welcome seasonal or part-time positions. It’s important to know that independent contractors are hired by you and not employed by you. You aren’t required to provide benefits, withhold tax/Medicare/Social Security, or pay unemployment taxes. You also can’t dictate the hours the contractor works. However, you are required to report compensation of $600 or more to the IRS.
Seasonal employment laws (benefit to employee and tax on employment):
If you are hiring employees, not independent contractors, whether they are seasonal employees or not, you must provide certain benefits by law. These vary by state but can include:
1. Unemployment Benefits: Check with your state department of labor to determine the specific laws that apply in your state. If an employee is hired on a temporary basis, there may be exceptions for “seasonal employers” who, because of the nature of their business, require temporary employees.
2. Social Security/Medicare: You must withhold part of Social Security and Medicare taxes from your employees’ wages and pay a matching amount yourself. Refer to the employee’s Form W-4 and the methods described in the IRS’ Employer’s Tax Guide and Employers Supplemental Tax Guide for more help.
3. Workers’ Compensation: Businesses with employees are required to carry Workers’ Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through a state Workers’ Compensation Insurance program. Your state’s agency can help you find out more about the requirements for employers. Download the business plan sample.
Last but not least, don’t forget taxes. Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees. For details on your tax reporting responsibilities, refer to IRS regulations on part-time or seasonal help. And don’t forget to check state tax laws that pertain to these employees too!