How To Know If An Employer Is Paying Employees Under The Table

While the majority of large and moderately sized corporations are paying their employees by bank transfer or direct deposit these days, there are smaller businesses that still pay in cash. This practice is sometimes referred to as paying employees under the table, and has shady connotations since in most cases this income is not being reported to the tax authorities.

Is This Practice Beneficial?

There are a number of reasons why some employers pay their employees in cash. Many like the simplicity of the practice and don’t want to deal with the regulatory agencies or having to report to them. There are others who are hiring illegal aliens to do jobs for a fraction of the cost of native-born citizens, and because these non-residents are ineligible to open bank accounts, cash is the most convenient way to pay them.

Employers that do things by the book have a lot of responsibilities. They must render unemployment insurance, workers’ compensation and taxes for social security. If they’re doing none of these things, there is a good chance they probably aren’t offering overtime or minimum wages for their employees. This means those that work for them are being cheated out of earnings plus they will never be capable of accumulating funds for social security.

Signs That an Employer is Paying Employees in Cash

One of the most common signs that an employer is paying their employees in cash beneath the table is describing the people that work for them as “independent contractors.” While many people indeed work freelance as independent contractors, a business that describes all or most of its workers in this manner is able to avoid certain obligations, namely taxes. Since a true independent contractor is usually responsible for handling their own taxes, this saves the businesses that hire them a tremendous amount of money.

If you’re in this situation and it troubles you, it might be a good idea to speak with an employment attorney. You can also file complaints with either the IRS or the Department of Labor. If you decide to go this route, it is essential to maintain track of each hour you work, that way you’ll have the needed documentation later should you decide to sue them for back wages.

In the State of California, paying employees beneath the table is taken so seriously that an employer might face criminal prosecution from the Department of Labor for doing so. This is because knowingly disregarding the state tax code and employment laws is a form of fraud. Companies or employers that engage in such behaviors might find themselves subject to fines, interest for unpaid taxes, audits and possibly jail time.  This is why those who are being compensated under the table should contact a qualified lawyer, as they will help you go over your rights and the possible actions you can take to receive fair compensation if they are violated. Unscrupulous employers take advantage of the ignorance; be sure you’re not one of them.