I/C Compliance in Healthcare: Independent Contractors vs Employees

I/C Compliance in Healthcare: Independent Contractors vs Employees

Ensuring compliance with labor laws and regulations is important for any business. And in healthcare, that job requires more diligence — and a few extra steps — than in most other industries. With that in mind, here’s a closer look at how healthcare leaders can ensure I/C compliance, why they should do so, and the importance of understanding the differences in independent contractors vs employees in healthcare staffing.

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What Is I/C Compliance in Healthcare Staffing?

The term I/C compliance refers to the process of meeting the rules around independent contractors in the workplace. Also called IC compliance, it governs all aspects of the use of these workers, including documentation, classification, taxation, and everything else.

These regulations exist to ensure that all workers receive a base level of benefits and protections, even if they only work on a limited basis. They’re also designed to prevent the mislabeling of workers. Whether intentional or not, misclassification can sharply affect an employer’s tax obligation. As such, failing to meet all these rules can open the door to fines or other serious penalties from the Internal Revenue Service (IRS) or Department of Labor (DOL).  

The Challenges of Achieving I/C Compliance in Healthcare

Yet if its purview is simple, the scope of I/C compliance is anything but. Rather than just a single standard, like HIPAA, I/C compliance is a patchwork of laws, rules, policies, and other guidelines decreed by lawmakers or regulatory bodies. These not only differ from state to state, but sometimes even city by city. And they all operate within a larger federal Fair Labor Standards Act (FLSA).

For instance, California’s AB5 law defines contractors differently than other states. And the “right to work” laws in Texas and a few other states create a different relationship between worker and employer. Not only do these rules not always align, but they can also contradict each other. As such, the process of meeting them will differ for each organization based on where it (and each of its facilities) is located.

That’s what makes compliance such a challenge — and what makes it so important to apply real expertise to get the job done. It takes serious knowledge to not only comply with all these rules, but even to understand them. Given their extent, diligence is also needed to stay aware of the newest version of each law or guideline that applies to each work relationship for every operator.

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Independent Contractors vs Employees in Healthcare Staffing

The process of I/C compliance covers every worker who isn’t a full-time employee. And in healthcare staffing, that’s a pretty big group of people. Especially since Covid-19, organizations are using more traditional contractors, as well as other freelancers, consultants, travel and per diem workers, and others.

And they have good reason for doing so. The benefits of using contract workers in healthcare settings are numerous and well documented. These workers can help employers more quickly fill open positions, particularly where labor is scarce. They can also give organizations the power to quickly scale up their workforce and ensure consistent, high-quality care during periods of high utilization.

Many healthcare employers also use contractors out of necessity. Especially during a general shortage of healthcare labor, contractors are the logical choice to not only fill staffing needs, but also to place experienced workers quickly and efficiently without the (sometimes long) process of sourcing a permanent hire.

Differences between Independent Contractors and Employees

What makes contractors different from employees? In the United States, taxes apply differently to people depending on the relationship they have with their employer. This distinction alone makes proper classification essential — and a matter of concern and diligent oversight for the IRS. But it’s far from the only difference.

For example, the classification of contractor or employee determines whether a worker is eligible for unemployment insurance. (Contractors are not, in general.) In addition, employers aren’t required to provide independent contractors with benefits like healthcare insurance and paid time off. The rules are also different for payroll management, workers’ compensation, overtime pay, and other elements.

How to Define Independent Contractors vs Employees

The most fundamental way to identify the difference between independent contractors and employees is tax status. Simply put, contractors use 1099s and employees use W-2 forms to define their status.

That’s the most important factor, but it’s not the only one. For instance, the IRS’ “common-law rules” defines workers not by their tax form but the relationship with their employer. These definitions include behavior control (management of individual workers) and financial control (non-compete clauses).  

Making sure that managers don’t contractors like employees may not seem like part of regulatory compliance, yet it all ties together. Especially in healthcare, roles and teams change based on need, which can blur the line between independent contractors vs employees. Knowing how to manage it all takes real expertise, and ideally, help from an expert.

7 Quick Guidelines for Distinguishing Employees from Contractors

Ensuring I/C compliance is a big, complicated job that requires expertise and a unique approach from each organization. At the same time, though, there are a few basic rules to more clearly define independent contractors vs employees. For instance, employers should be sure to:

1. Make sure to file the right tax forms for each worker.

2. Clearly establish differences in the benefits provided to employees and everyone else — for instance, paid versus unpaid leave.

3. Stipulate the time of each relationship, or define them in terms of a project.

4. Reserve heavily managed tasks to employees, while leaving contractors’ responsibilities more open.

5. Distinguish between providing supplies to employees, while requiring contractors to provide their own.

6. Establish training and development programs for employees.

7. Provide a written contract for each worker that describes as much of the above info as possible.

These guidelines help define a worker’s status as contractor or employee, and determine which is needed when a new position needs to be filled. Contractors can’t be closely managed, for instance. So, they may need to be assigned different tasks, which might not align with an employer’s needs.

Similarly, morale may suffer when benefits openly granted to employees are denied to contractors. One way that employers can solve that problem is by partnering with a nationwide staffing company that makes sure contractors receive a full array of benefits. Even better, these benefits are provided by and paid for by the staffing company itself!

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Meet the Challenge of Successful I/C Compliance with CareerStaff

One of the many benefits of partnering with an established healthcare managed services provider (MSP) is getting access to a huge network of temp and travel workers — with I/C compliance fully covered. The contract workers provided by CareerStaff Unlimited aren’t just fully vetted and screened, but also work in compliance with labor laws and rules.

On top of that, we can help strategically align your entire workforce to ensure not only compliance but also flexibility, scalability, and cost efficiency. From nationwide clinical staffing to MSP services, our Joint Commission-Certified solutions are customizable to meet your needs. Contact us today to learn more about our services to meet your I/C compliance needs.

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