A “First of its Kind” PFML Plan launches in New Hampshire
Beginning in December 2022, employers can start enrolling in New Hampshire's new voluntary Paid Family and Medical Leave plan for employers and employees of all types of businesses.
To determine whether a worker is an employee or independent contractor, many companies utilize the common law test. Simply put, if someone performs services for a business and that business controls what will be done and how it will be done, that person is an employee.
With the common law test considered, there are two special types of employees that are not often discussed: statutory employees and statutory non-employees.
A statutory employee is a special type of worker whose wages are not subject to federal income tax withholding but are subject to FICA (Social Security and Medicare) and FUTA (unemployment) taxes. These employees are statutory employees because under the common law test, they are an independent contractor by definition but they can be treated by statute to avoid paying federal income tax. Statutory employees include:
Statutory employees can avoid FICA taxes if they meet any of the following: their contractor agreement states all services are performed personally by them; they do not have an investment in the equipment used to perform their services; the services they perform are for the same payer on a consistent basis.
Statutory non-employees qualify as independent contractors under the common law test but are treated as employees when it comes to paying taxes, meaning they are not subject to federal income withholding tax OR FICA and FUTA taxes. There are three categories of statutory non-employees:
To be exempt from ALL withholding taxes, statutory non-employees must meet the following: their services are performed under a written contractor stating they will not be treated as an employee; the payments for their services are directly related to their sales and not to the hours worked.