Stop Calling Everyone a 1099: The Hidden HR Risk Small Businesses Can’t Ignore
Stop Calling Everyone a 1099: The Hidden HR Risk Small Businesses Can’t Ignore by Purciarele Group If you run a small business, you’ve probably heard some version of: “Just make them a 1099. It’s easier and cheaper.” On the surface, it does sound easier. No payroll taxes, no benefits, no overtime calculations. But misclassifying employees as independent contractors is one of the most common—and most expensive—HR mistakes small businesses make. And this isn’t just an IRS problem. Misclassification can impact wage and hour compliance, unemployment, workers’ comp, and even how you manage day-to-day operations. (Quick note: This is general information, not legal or tax advice. Classification rules are fact-specific, so when in doubt, get guidance based on your situation.) Why Misclassification Is Such a Big Deal When someone should legally be a W-2 employee but you treat them like a 1099 contractor, a few things happen: You’re not withholding or paying the proper payroll taxes. You ma...