Employee Classification

 What is an Employee classification?

Employee classification is a way to put workers into groups that affect their pay, taxes, and perks. It also sets out what workers are responsible for and what companies are required to do. There may be different rules for each group when it comes to paid time off, overtime, taxes, and superannuation.

Employers classify their employees into five main types, plus one extra type:

1. full-time employees
2. Part-time employee
3. Temporary employees
4. Interns
5. Seasonal workers
6. Leased employees (the extra type)

Let’s explore each type of employee in more detail.

1. Full-time employees

People who work full-time usually put in 40 hours a week, get benefits, and may not have a set end date for their contracts. They are what are known as "permanent employees." Also, if the company or group has more than 50 full-time workers in the US, it has to provide health insurance to these workers and their families.

People often think that full-time work is one of the safest and most reliable types of work because companies offer a fixed salary plus hourly overtime pay.

But if the job only pays the minimum wage, working full-time can be a drawback, which makes it hard for companies to keep good employees.

2. Part-time employees

These people usually get paid by the hour and work less than 40 hours per week. Still, some part-time workers would rather be paid a salary, so it depends on the business.

People who work part-time can also become full-time if their contract doesn't have a set end date. Still, these people might not be able to get benefits.

3. Temporary employees

On the other hand, temporary workers (or temps, if you prefer) have a set end date on their contract. Most of the time, these people stay with the same company for six months to two years. There are also people who are hired just for a job. After that, when the job is done, their contract is over.

Now, you can have temporary full-time workers and temporary part-time employees based on the number of hours per week. Temporary workers are great for short-term jobs and can help get more done when things are busy.

Hiring temporary workers is also a good way to check out the job market and see how skilled people are without having to give a full-time job.

4. Interns

Most internships are only for a few months at most, and interns can be paid, partly paid, or not paid at all. Most of the time, they are high school or college students looking for their first job. You never know when an internship could lead to a job at your business.

5. Seasonal workers

Seasonal workers are another type of temporary worker who is hired when a business needs extra help during certain times of the year. This need usually comes up at a certain time of the year, most often during the summer months or winter breaks.

6. Leased workers

The person in this role is still a paid worker or employee and not an independent contractor, but they won't be on your company's payroll.

The name of the service suggests that a company can rent workers from a staffing firm (and pay the workers) to finish a project or help out when they're busy.

In the new economy, employees can be classified in a number of ways. The examples below show different types of jobs and contract work.

Remote workers vs independent contractors

By definition, people who work from home are not in the office or job. They instead do their work from afar, like from home or somewhere else in the world.

The number of people who work remotely (from home) has grown faster during the pandemic. However, it's also a result of the rapid progress in technology we've seen in recent years.

Companies today have access to a talent group of people from all over the world thanks to portable devices and services that let employees in the office and those working from home work together.

Of course, as a business owner, you need to know that remote workers aren't always temporary workers or independent agents.

You can have full-time, part-time, or temporary staff who work from home, as well as independent contractors who work from home.

They are different because the first type is a standard employee and the second type is a collaborator who works from home and manages their own time, devices, and taxes.

As an independent contractor, many remote-first companies hire people because it's the easiest way to get people to work for them without having to deal with the different business and labor rules in each country. 

Reference

Perkins, J. (2024, January 22). Employee Classification: A Practical Guide for HR. AIHR. https://www.aihr.com/blog/employee-classification/#:~:text=reliability%20and%20trust.-,What%20are%20the%20types%20of%20employees?,Leased%20employees%20(the%20extra%20type)

https://study.com/academy/lesson/types-of-employee-classification.html#:~:text=The%20three%20most%20common%20categories,paid%20directly%20by%20their%20employer.

[online] [Accessed 01 April 2024]