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Understanding the impact of misclassification on benefits

On Behalf of | Jul 30, 2024 | Employment

Misclassifying workers is a big issue that affects both employers and workers. It happens when a worker is wrongfully labeled as an independent contractor. In Kentucky, it’s important to know how this can affect benefits.

Health insurance

One of the main benefits affected by employee misclassification is health insurance. Employees usually get health insurance from their employer, while independent contractors do not. If a worker falls under a misclassification, they might not get health coverage and have to pay more for medical care. Without employer-sponsored health insurance, workers may struggle to find affordable coverage. This can lead to significant financial strain in the event of illness or injury.

Overtime pay

Employees must get overtime pay for working more than 40 hours a week, but misclassified workers don’t get this benefit. Independent contractors do not get overtime pay. Misclassified employees might work longer hours without getting paid extra. This lack of overtime pay can lead to financial hardship, as workers are not compensated for their extra time and effort. It can also result in burnout and decreased job satisfaction.

Retirement plans

Retirement plans, like 401(k) options, are another benefit employees may lose under a misclassification. Employers often contribute to these plans on behalf of their employees. Independent contractors do not get this benefit, which can hurt their savings for the future. 

Other impacts of misclassification

Misclassification can also affect other benefits. These include paid time off, unemployment insurance, and workers’ compensation. Employees are generally entitled to these benefits, whereas independent contractors are not. This can leave misclassified workers without necessary support in times of need, such as during a job loss or workplace injury. Misclassification can lead to tax complications, resulting in potential penalties and legal issues.

Creating a fairer workplace

Making sure workers are correctly classified ensures they receive the benefits they deserve. Employers and workers in Kentucky should both understand how misclassification affects them. Informed employers can avoid legal problems and foster a more positive work environment. Likewise, workers can receive the benefits and protections they deserve. Ultimately, fixing misclassification can create a better workplace for everyone. 

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