What are the benefits of being a statutory employee?

Employment of a “statutory employee” is characteristic of some employees, which entails specific tax and benefits that may be more favorable in particular contexts. Here are some of the key benefits statutory employees may receive:

Tax Benefits

Statutory employees’ tax filing is slightly different from the W-2 employees, as explained below. More particularly, statutory employees are required to file their income and expenditures on schedule C of the tax returns. This lets them claim many business deductions that other employees can only dream about. For instance, the statutory employees may be entitled to deduct costs such as transport, home office expenses, health insurance, retirement, and many others.

Further, the self-employment tax rate is lower than the payroll tax rate prescribed for normal employees but for statutory employees. Leveraging the business deductions coupled with self-employment tax rates can amount to significant tax advantages.

Benefits Flexibility

Unlike the regular employees, the statutory employees are not entitled to issues such as the minimum wages, the rates of pay for overtime, discrimination, and unfair dismissal, family and medical leave among others; this however, has its pros in that the statutory employees offer their employers the opportunity to design individual compensation and benefit structures since they are not bound by numerous rigid policies. They may also get to take advantage of some of the special tax-privileged individual retirement and health plans that are out there for the self-employed.

Independence

While they are treated as employees under an employee classification, statutory employees work with a great deal of autonomy like independent contractors. They have control over the working hours, place of work, what they wear, and other things that are associated with it. It is in this freedom that a person can be able to balance his or her duties at work with other responsibilities in life.

Drawbacks

Of course, statutory employees are not devoid of some benefits but being statutory they are devoid of chief employee protections and benefits. Statutory employees enjoy most of the employer frills excluding health insurance, retirement plans, disability insurance, paid vacation/sick days and unemployment benefits enjoyed by regular employees. They also have to pay the full Social Security and Medicare payroll taxes rather than have the split liability with the employer.

In conclusion, the status of statutory employee has certain useful potential financial benefits and the opportunity to control the work in certain degree. However, one also has to look at the incidental expenses and dangers associated with using this employment classification in order to decide whether or not it is financially advantageous. I have found that speaking with a tax professional offers more information on how statutory employee status might affect me.