Regardless of your position it is very important to fully understnad the difference between various employment statuses.

Employee status is defined by both IRS code and DOL laws.

Non-exempt simply means the employee is not exempt by DOL from the employer paying overtime. They may work for the client company or a third-party provider.

Exempt is a status given to certain employees who meet DOL requirements such as minimum salaries, job titles and certain work requirements (outside sales must work no more than 19.99% from the office or a remote office). Like Non-exempt they may be employed by either the client or third-party company.

A contract employee is an employee who works for a third-party company proving contracted services and has their taxes withheld and the employer assumes the role of the primary management role in a co-managed relationship. The client is more protected as the staffing agency or recruiting agency is the employer of record and assumes most if not all liability. Where the primary employer was unable, refused or disputed liability the client company has been held liable in past cases.

An independent employee is a self-employed person who is responsible for filing their own taxes. Some have attempted to avoid the IRS form classifying them as independents by incorporation. The federal can provide you with a set of guidelines to determine the status of an employee. States also have their own laws you will wnt to look at too. You are required to follow the stricter of the two. Independent contracts can be a huge asset to an employer however; misclassification can create a situation no employer will want to become involved. Knowing and following the laws can provide your business with great advantages. The same goes for Exempt and Non-exempt status.

Staff leasing employee are those whose primary employer of record is usually a professional employer organization (PEO). The PEO takes on administrative responsibility while the employer retains day to day primary management of the employee. Some call this leasing their own employee back to the employer. What is actually happening is for the purpose of better rates of health care insurance, workers' compensation, human resource and other administrative services and products the employee is placed under the tax identification of the PEO. The rates are usually much lower since the employer's employees are pooled with tens of thousands of other employees from other companies.  This economy of scale is the same power found in the fortune 1000 and other larger corporations who pay much lower prices based on higher volume.

One form of employment agreement not mentioned in the title is the back office employee. This is an employee who is recruited by a recruiting or staffing agency who then turns over the employee to the back office much like in the PEO agreement. The difference is that they back office for a premium price (usually close to half of the fees) takes on full responsibility of the employee and provides the necessary insurances, collects and pays the taxes, contracts the employee under their own contract, provide time and attendance and most all the normal functions of the primary employer including human resource and other services. While this may seem like high fees the tradeoff is quite fair considering the recruiter or staffing agency only has to provide the sales side of the employment equation.

I often get emails for recruiting positions, which do not even come close to the standards of the IRS or the states of their corporate office or my state. They assume by claiming the recruiter is on a limited contract makes them compliant with the IRS. The truth of the matter is that if an employee works form their own home dose not make them a legally contracted employee. More so if that employee takes their orders from the employer on a daily or weekly basis, uses their equipment (ATS) or is required to do much more than agree to minimum standards. There was once a time when you could get away with this. Now the IRS pays employers a percentage of any monies they recover from corrupt employers.

The author of this post is not an attorney and none of the preceding information should be considered legal advice.