The Dangers of Independent Contractor Travel Agent Misclassification
You may not think of this as important when vetting out your host agencies, but making sure the host agency follows the independent contractor rules of the government is as important of a question as how much it costs to join or what the commission split is. Being an independent contractor travel agent versus an employee is an important distinction.
Why Should Misclassification Concern You?
If the host agency is audited and found to have misclassified their independent contractor travel agents, the fines and back-taxes add up to a huge price tag. It's not pretty. A New York Times article profiled a company that misclassed 18 workers and received a $328,500 penalty bill. Most host agencies have more than 18 home based agents working under them. Catch my drift? A host agency that isn't protecting themselves from misclassification could easily go bankrupt with fines this high.
Increased AuditsThe government loses millions of dollars in taxes from misclassified workers. Since the government has continued to see record deficits, there has been a crackdown on independent contractor classification.
Independent Contractor Classification
I wish I could tell you independent contractor classification is cut and dry, but it's murky waters. Not only is there is room for interpretation in the existing independent contractor laws, but these laws vary by state, which is to mention nothing of the federal government's independent contractor laws. Your host agency should be well-versed in how to protect themselves and their agent network, so don't be afraid to ask. In this case, knowledge is power. Being aware that this is even an issue and properly screening your host agency is the first step. The next step is to avoid any pitfalls by looking for major red flags. Be aware that you may not be an independent contractor if the host agency:
- Requires you work certain hours
- Requires you to work from a certain location
- Requires you work in a certain way
- Gives you benefits
Making sure your host agency has a written contract indicating that you are an independent contractor and which outlines your responsibilities is another important consideration for an agent.
In the end, I'm not an expert in independent contractor travel agent classification. If you have doubts about your classification, ask your host agency for more information or contact a travel industry attorney.Sources: https://www.irs.gov/pub/irs-pdf/p1779.pdf https://www.nytimes.com/2010/02/18/business/18workers.html?pagewanted=all If you like what you read, join 18,394 agents and sign up for our monthly newsletter for more helpful articles.
Hi, I'm Steph! I specialize in working with people looking to start and/or grow their travel agencies. I've worked with thousands of agents and helped them learn more about the travel industry... and I'm happy to help you out too. If you've found this article helpful, please help give it some love via like/tweet/share or drop us a comment! Learn more about Steph>>