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When misclassification issues arise, companies are often required to convert consultants into employees to remain compliant.
4. Operational Risks and Disputes For example, a pharmaceutical company operating across multiple African countries engaged 20 consultants as sales managers for over two years. When internal compliance audits flagged the risk of misclassification, the company attempted to convert these consultants into employees. The transition failed due to irreconcilable differences: consultants demanded salary increases to compensate for tax deductions, and the company was unwilling to comply. Ultimately, the
These negotiations can lead to delays and strained relationships between the company and its workforce. 3. Increased Employer Obligations Employers must also adapt to new responsibilities, such as paying payroll taxes, contributing to social security, and offering benefits like paid time off, maternity and paternity leave, and medical insurance. These additional costs can strain budgets, particularly for companies with large consultant workforces.
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GLOBAL PAYROLL MAGAZINE ISSUE 8
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