Worker classification plays a major role in determining how payroll is run. It dictates whether workers qualify for workers compensation, how taxes are withheld, and what processing costs are applied. Miscategorizing workers can be highly disruptive, so it's important to be careful about how you're classifying your workers.
Worker types
Workers are categorized during onboarding, and must be correctly labeled before the first payroll is run.
There are three options for worker type: Employee, Loan-Out, and Contractor
Employee
Employees typically make up the bulk of your workforce.
When a worker is classified as an Employee:
Wrapbook is theirEmployer of Record for the sake unemployment, and tax withholdings
They’re covered under Wrapbook’s workers compensation policy
They get taxed under their SSN
Loan-Out
A loan-out typically requires an individual to have anEIN and must have an S-Corp, a C-Corp, or be an LLC that files as an S or C. No other incorporation types will be serviced as a loan-out.
When a worker is classified as a Loan-Out:
They’ll be classified as a contractor and receive a 1099-MISC against their EIN
No employer payroll withholdings will be owed
They’re covered under Wrapbook’s workers compensation policy
Contractor
The legality of whether a worker can be classified as a contractor varies greatly from state to state, but in most cases, if a production company gives a worker direction or a call time, they most likely cannot be called a contractor.
Different states apply different standards to determine whether or not a worker may be classified as an independent contractor. Two common ones include the ABC Test and the Common Law Test. For more information on worker classification tests, see the Wrapbook blog post, Worker Classification Tests by State.
When a worker is paid as a contractor:
The production company serves as the EOR
Change worker classifications
Worker types are configured in the Details section of a project’s settings:
In the left side navigation, click the dropdown menu
Select the name of the project that you want to update worker classifications for
In the left side navigation, click Project settings
On the Project details page, scroll down until you see the section called What kind of workers will be hired?
From here, you can click to enable or disable worker types
Worker types cannot be updated when:
The worker already received payment
In this instance, our Operations team will need to process a reversal of the payment and correct the worker type. Please reach out to the Support team for assistance.
Select a project, then click Project settings. Click to enable or disable worker types.