If you are planning to hire employees in Rhode Island for your business, you should first understand certain critical concepts. Consulting with a legal and/or accounting professional will be very helpful during this process.
One of the most common mistakes made when hiring employees is misclassifying workers. Misclassifying a worker may cause your business to owe penalties, back taxes, and back pay. Each employee must be classified as an independent contractor or an employee.
The IRS says there are three basic categories of factors that are relevant to determining a worker's classification:
- Behavioral control (whether there's a right to direct or control how the worker does the work),
- Financial control (whether there's a right to direct or control the business part of the work), and
- Relationship of the parties (how the business and worker perceive the relationship).
For more information about additional types of employees, refer to the IRS website.
Still not sure? The IRS has several scenarios you can review to make sure you are in compliance with whatever worker classification you choose!
For those individuals your business classifies as employees, you also need to determine whether that employee is “exempt” or “non-exempt” from overtime. In Rhode Island, these classifications are governed by both federal and state law.
The US Department of Labor (DOL) sets federal employment standards. The RI Department of Labor and Training also sets and enforces requirements for employers in the state. While Rhode Island follows the federal Fair Labor Standards Act (FLSA), its laws apply different definitions and mandate different minimum wage and overtime rates.
- Labor Market Information from RI Department of Labor and Training
- Workforce Resources for Employers Insurance
- Small Business Development Center: Employee or Contractor? (blog post)
- Internal Revenue Service
- U.S. Department of Labor
- U.S. Occupational Safety and Health Administration