Statutory Employee

A statutory employee is a specific classification for employees under the United States Internal Revenue Service's (IRS) tax code. This classification is for employees who are not required to pay Social Security or Medicare taxes, but the employer is still required to pay their share.

To be classified as a statutory employee, an individual must meet specific criteria. Some common examples of statutory employees are:

1. Full-time life insurance salespeople- These individuals typically receive all their income from commissions on the policies they sell.
2. Certain drivers - Such as a delivery driver, who is hired by a company to deliver their products, and the driver is not responsible for paying for the truck, insurance, or fuel they use.
3. Home-based workers - Such as a homemaker who works for an agency or group that provides in-home services for the elderly or disabled. This means the worker is not responsible for finding their clients, setting their rates, or providing their own tools, equipment, or transportation.

Statutory employees are also entitled to certain rights and protections that regular employees do not have. For example, statutory employees have the right to worker's compensation if they are injured on the job, even if they work as independent contractors. Additionally, statutory employees are entitled to unemployment benefits if they are laid off or have their hours reduced, unlike independent contractors.

It's important to note that not all individuals who meet the criteria for statutory employees will be classified as such. The IRS has specific guidelines and requirements for employers to ensure that individuals are accurately classified. Employers who fail to properly classify workers could face penalties and fines.