Definition of Employment and Types of Employees

At the heart of human resource management is the concept of employment.

Employment is the process of providing work, engaging services or labor, and paying for the work performed.

Those persons, businesses, or organizations that provide the work, engage the services or labor, and pay for the work performed are employers. The vast majority of individuals who are engaged in these services or labor are employees.

Generally, an employee is an individual hired by another, such as a business firm, to work for wages or a salary.

Employees are covered by a host of laws at the federal, state, and local levels, ranging from insurance and pension benefits to workplace safety requirements and protections from discrimination.

Types of Employees

Many types of employees exist, and the meaning of each employee type carries with it certain benefits and protections under federal and state laws.

1.     Regular Employees

A regular employee, sometimes referred to as a common law employee, is one who has a continuing relationship with the employer. To create a continuing relationship, it is not necessary for the work to be performed on a daily basis; rather, the work must be performed according to some frequency—for example, several days per month.

Employees are generally classified as full-time if they work 30 hours per week or more, part-time if they work less than 30 hours per week.

Many part-time employees are paid on an hourly basis and, under some state laws, may receive different benefits than full-time employees. At one time, employers used the term “permanent employee” interchangeably with “regular employee”; however, permanent employee has since lost favor, because it implies that an employee has some right to stay with the business or organization indefinitely without change.

2.     Leased Employees

Leased employees, sometimes referred to as temporary employees, are employed by a service firm and are assigned to work at a business or an organization. Both the work product and the manner in which the work is performed by the leased employee are subject to the control of the business or organization.

While leased employees may work at the premises and under the direction of a business or organization, they receive their pay-checks and benefits from the service firm. Leased employees often perform work for a fixed period, typically on a specific project. Once the project is completed or the fixed period ends, the leased employee is assigned to work at another business or organization.

Leased employees are expected to abide by the rules and regulations of the business or organization where they are assigned to work, but under many state laws the employees must look to the service firm and not to the client business or organization for benefits such as unemployment insurance Opens in new window compensation.

3.     Independent contractors

Not all individuals who work with businesses and organizations can be classified as employees. Many businesses and organizations use independent contractors to complete work.

An independent contractor is an individual who agrees to perform certain work according to her own means, manner, and methods of performance. This personal control over means, manner, and methods does not mean that the business or organization does not exercise any form of control—merely that the amount of control is limited.

In the employer-independent contractor relationship, the level of control exercised by a business or organization is limited to the results or products of the independent contractor’s work. By contrast, in the employer-employee relationship, the employer has control over the means, manner, and methods of completing work, along with the end result or product of that work. Many independent contractors offer their services to multiple businesses and organizations, thereby solidifying their independence from any one employer.

4.     Statutory Employees

A classification of worker that does not fall into the category of employee or independent contractor is a statutory employee.

A statutory employee is one who has been designated by specific laws as subject to the tax withholding requirements imposed upon employers but who might not otherwise be considered an employee.

The issue of control has no relevance to this definition, since those groups of workers who have been designated as statutory employees are categorized as such because of the specific type of work they perform. The benefits and protections offered to these statutory employees vary greatly.

Groups of workers who have been classified as statutory employees under these laws include delivery drivers, life insurance agents, and traveling salespeople who sell business-to-business.

Many legal consequences result from the classification of workers as employees, independent contractors, or statutory employees. Whether a given worker receives certain benefits and protections rests largely on her classification. If individuals are classified as employees, the law imposes certain obligations upon employers to verify the identity and employment authorization of every employee hired. Such obligations arise pursuant to the Immigration Reform and Control Act (IRCA) Opens in new window and are met through the use of the federal Employment Eligibility Verification form, commonly known as the I-9 form. An example of the I-9 form is shown in Exhibit I & II.

Exhibit I: Form I-9, Section One

Exhibit I: Form I-9, Section One

Exhibit II: Form I-9, Section Two

Exhibit II: Form I-9, Section Two

In addition to using the I-9 form, employers may participate in the federal government’s E-Verify program. This program is operated jointly by the Department of Homeland Security Opens in new window and the Social Security Administration (SSA) Opens in new window.

Participating employers can check the work status of new hires online by comparing information from an employee’s I-9 form against SSA Opens in new window and Department of Homeland Security Opens in new window databases. This comparison allows the employer to determine the employment eligibility of new hires and the validity of their social security numbers.

While some consistency exists within federal law, contrasts with state law are not unusual. For example, a worker may be properly classified as not an employee pursuant to the tax requirements of federal law but be classified as an employee under state law for workers’ compensation or unemployment insurance Opens in new window purposes.

As a general rule, the strictest law is the law that takes precedence over the other laws in any given situation. Accordingly, it is important that each employer becomes familiar with the variations among federal, state, and local laws when classifying workers and providing benefits and protection.

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  • References
    • Today's Health Information Management: An Integrated Approach Employment (p. 357/8) By Dana C. McWay

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