How to Classify Employees

The number of contract employees has been steadily climbing over the years, and it’s not just workers from outside the US that are contracted. Employees inside the US offer valuable services, but contractor rates keep costs low for business. There is still the question of how these employees are classified, leading to very real and legal questions down the road for businesses that abuse these classifications.

Hourly vs. Salary

A salaried employee is paid a fixed amount, typically bi-weekly or monthly, for services provided to an organization. This work is typically white-collar work and often requires employees to work more than 40 hours a week, although that can depend on the job. Hourly employees enter their information into an Employee time clock that records the hours worked. These time clocks also analyze which department an employee works for, and track other statistics relevant to payroll. Salaried employees are subject to overtime for hours worked outside of the full-time range (IE more than eight hours in a day, or more than 40 hours in a week).

Temp vs. Full-Time

Temporary, or “contract” employees, are typically only at a company for a set period of time. They may be hired full-time, but their privileges are restricted until that occurs. Where a full time employee may attend meetings and offer suggestions on workload, a part time contractor has less say in what goes on. A contractor also has less responsibility than a full-timer, usually only responsible for the product itself and rarely part of the project management process. Contractors can work full-time hours and remain contracted employees. The change occurs when a contractor is hired to work exclusively for the employer, and begins to perform services under that company’s name.

Time Tracking

Companies often use time and attendance systems to measure activity on and off-site. These may include mobile applications that allow employees to check-in remotely, biometric clocks that record time based on a thumbprint and time sheets filled out manually by an employee. Tracking may also be a requirement of salaried employees, even though they are not subject to provisions like overtime.

Project Management

Employee classification is also important to project management, where managers may need to balance resources in-house with contractors outside of the company. In-house staff may manage the “big picture” integration, while contractors actually assemble the various components of a product. This is especially true in the tech industry, where coding and conceptualization tend to occur in-house.


The preceding guest post was provided by Allied Time, suppliers of the Amano time clock. For over 40 years, Allied has been supplying businesses with solutions to track billable hours.

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