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Multiple Choice

You are mentoring three new electrical contracting business owners who each describe how they manage their workforce. Evaluate their approaches and determine which owner has the most legally compliant payroll and worker classification setup.

Owner A: Classifies electricians as W-2 employees, withholds federal income tax, Social Security, and Medicare from each paycheck, tracks actual hours worked daily, pays overtime at 1.5× the regular rate for any hours exceeding 40 per week, and offers health insurance.

Owner B: Classifies electricians as independent contractors (1099), does not withhold any payroll taxes, but sets their daily work schedules, assigns them to specific job sites, provides all tools and materials, and offers paid vacation.

Owner C: Classifies electricians as W-2 employees, withholds federal income tax, Social Security, and Medicare, but pays a flat weekly salary without tracking actual hours worked and does not calculate overtime separately.

Owner D: Classifies electricians as independent contractors (1099), does not withhold any payroll taxes, lets them choose their own schedules, requires them to supply their own tools, and does not offer any employee-type benefits.

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Updated 2026-05-04

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