Statutory Employee

Statutory employee is a term used by tax agencies to describe certain workers who are treated as employees for tax withholding purposes although they have some degree of independence or autonomy in their work arrangements. Statutory employees come under a definite tax regime and they may get specific benefits like Social Security and Medicare contributions. Classic instances of statutory workers are delivery drivers, outside sales representatives, and some kinds of contractors or freelancers.

Example of Statutory Employee

A courier company regards its delivery drivers as statutory employees for tax purposes since the nature of their job and the level of control exercised by the company is similar. Although the drivers enjoy the flexibility of choosing their routes and working hours, they have to follow the company’s policies, use company-provided equipment, and meet delivery schedules set by the company. On their paychecks, the drivers have the taxes deducted, and the company also pays for the Social Security and Medicare contributions. This categorization guarantees compliance with tax laws and offers drivers financial security.