Employee Classification Guide: 7 Types of Employment

Gabrielle Sinacola | May 15, 2024

Employee Classification Guide: 7 Types of Employment

Understanding employee classifications ensures everyone gets the fair shake they deserve regarding compensation and benefits.

For businesses, especially those sprouting in various states and embracing remote work, this knowledge is the foundation of creating a cohesive workplace that thrives within the bounds of the law.

At Mosey, we’re on a mission to simplify the world of employee types for you. We aim to be your trusted source of clarity and authority in the often-confusing realm of employment classifications.

Why Is Correct Employee Classification Important?

Getting employee classifications right is about safeguarding your business against the legal and financial penalties that can come from misclassification errors.

Misclassifying an employee can lead to back taxes, fines, and a tangle of compensation claims — not to mention the hit to your reputation and team morale. It’s a high-stakes game where the cost of misunderstanding can be steep.

Mosey understands that keeping track of every compliance rule feels like trying to catch a cloud. That’s why we’ve developed a system designed to clear the air.

We offer a clear, straightforward platform to help you stay on top of compliance tasks based on your unique payroll data. From identifying the right payroll accounts to open in various states to offering a view of compliance requirements across the board, we’re here to ensure your business’s compliance is in check.

What Are Employee Classifications?

Within employee classifications, every choice impacts payroll compliance and the benefits your team might access. Think of employee classifications not as dry, bureaucratic labels but as keys that unlock different sets of rules for compensation, working hours, and benefits eligibility.

It’s about knowing who gets what and why under the watchful eyes of state and federal regulations. Understanding these classifications helps you, the business owner or HR pro, ensure everyone in your team is correctly categorized so they’re getting the benefits they’re entitled to.

Beyond the familiar full-time and part-time distinctions, there’s a whole spectrum of employment types, including contract workers, independent contractors, temporary hires, and even volunteers, each with its own playbook for compliance and compensation.

1. Full-Time Employees

When discussing full-time employees, we look at many businesses’ backbones. These are the folks who clock in a standard work week, often soaking in the stability of a set schedule and a salary that hits their bank account comfortably.

They’re usually first in line for a suite of benefits — think health insurance, retirement plans like 401(k)s, and paid time off to relax or go on vacation.

However, here’s where it gets interesting: The exemption status. Many full-time positions are exempt from overtime under the Fair Labor Standards Act (FLSA), meaning they don’t get paid extra for logging more than 40 hours a week.

This is typically because they earn a salary above a certain threshold, and their job duties tick specific boxes, like managerial or specialized tasks. This classification is a double-edged sword for businesses — offering flexibility in managing workload but requiring a keen eye to ensure all criteria are met.

2. Part-Time Employees

Part-time employees are the adaptable players in the workforce, weaving through fewer hours with the agility of a cat. They often work less than 30 hours a week, which means their paychecks match the hours on the clock — every hour counts.

This setup offers them a tantalizing taste of work-life balance, allowing space for studies, hobbies, or even juggling multiple gigs.

For employers, part-time workers bring versatility to the staffing mix but come with their own set of rules. They’re typically non-exempt, making them eligible for overtime pay once they surpass 40 hours in a week — a rarity but a possibility, especially when they’re wearing multiple job hats.

While benefits might be more of a pick-and-choose affair than their full-time counterparts, understanding and offering what you can is crucial for keeping morale high and turnover low.

3. Contract Employees

Contract employees are like the guest stars of the workforce, brought in for their special talents to shine in specific roles for a fixed term. Whether it’s wrapping up a project, filling in gaps, or bringing in niche expertise, these workers know their run time from the start, with an end date that’s as clear as the plot of a classic movie.

Note that while they might be on your payroll, contract employees often tread a different path regarding benefits and compliance. They’re often non-exempt, so they’re eligible for overtime and, depending on the contract’s structure, might have a different benefits package — or sometimes, none at all through your company.

It’s a setup that demands a clear understanding of what compliance means for these temporary teammates to ensure their time with you is both productive and properly managed.

4. Independent Contractors

Independent contractors are the freelancers of the business world, bringing their expertise to the table on their own terms. They’re self-starters, working project by project, with the freedom to set their own hours.

Unlike traditional employees, they manage their own taxes and often hop from one assignment to the next without the cushion of company-provided benefits.

This freedom comes with its own set of rules, especially regarding compliance. Since they’re not on your payroll, the usual employee benefits and protections don’t apply.

However, it’s important to correctly classify them to avoid the whirlwind of legal repercussions that can come from misclassification. Understanding where they fit within your organization is key to maintaining a clear, compliant relationship.

5. Temporary Employees

Temporary employees step in to cover maternity leaves, peak periods, or special projects. Their employment is a fixed-term affair, often with an end date in sight from the very beginning.

Compliance and benefits are a mixed bag for these temporary team members. They’re generally considered non-exempt, making them eligible for overtime pay, but their short-term status often means a lighter benefits package, if any at all.

It’s a delicate balance — you must ensure they’re treated fairly and according to the law during their stint with your company.

6. On-Call Employees

On-call employees are like the emergency responders of the workforce, ready to dive into action when the need arises. They may not be in the thick of it daily, but when their phone rings, they’re expected to be available and ready. This flexibility is important for roles that demand an immediate in-person or remote presence.

Managing compliance for on-call employees is where Mosey shines. Our platform helps ensure that even the most unpredictable schedules are kept within the bounds of employment laws.

From tracking hours to understanding how different states view on-call work, we’re here to help you keep everything straight, ensuring your on-call staff are compensated fairly and in line with legal requirements.

7. Volunteers

Volunteers are the heart and soul of many nonprofit endeavors, driven by passion rather than paychecks. They lend their time and talents without expectation of financial reward, making their contribution invaluable yet intangible in the traditional business sense.

While they’re not employees, there are still legal nuances that must be taken into consideration. Ensuring that volunteer work remains truly voluntary and doesn’t inadvertently cross over into employee territory is important.

It comes down to understanding the boundaries and ensuring that your organization respects the spirit of volunteerism while staying clear of potential legal pitfalls.

What Are the Risks of Misclassifying Employees?

Misclassifying employees comes with risks, from owing back taxes and facing audits to compensating for unpaid overtime and benefits. It’s a scenario that can unravel the tight-knit fabric of your workplace, affecting morale and your bottom line.

However, with Mosey, we proudly stand as your compliance partner. We’re dedicated to making sure you can stay ahead of compliance with a preventative solution.

Our platform is designed to spot potential compliance issues before they become problems, offering clear, actionable advice to keep your business on course.

Mosey’s Role in Simplifying Compliance

At Mosey, we believe compliance shouldn’t be complicated. That’s why we’ve created a platform that lights up the path to compliance, making it accessible, understandable, and manageable.

Whether you’re dealing with full-time employees, independent contractors, or any classification in between, we’ve got the tools and insights you need to confidently face legalities.

Our platform offers a comprehensive suite of features designed to streamline compliance management. From automated alerts informing you of changing regulations to a user-friendly dashboard that gives you an at-a-glance view of your compliance status, Mosey makes it simple to stay ahead of the curve.

We invite you to book a demo today to see firsthand what we can do for you.

Read more from Mosey:

Review your compliance risks, free.

Ready to get started?

Sign up now or schedule a free consultation to see how Mosey transforms business compliance.