Change employment type—employee to contractor, contractor to employee

1. Dismiss the US employee profile in Gusto.
   • They'll be removed from future payroll in Gusto, and;
   • After their dismissal date, they'll be considered inactive—you're only charged for the months an employee was active (even if partially).
     • Heads up: Because we bill in arrears (for the month prior), you'll typically still see an employee charge on the invoice that comes immediately after someone is dismissed.  
2. Add the person as a US contractor. 
   • You're only charged the monthly per-contractor price ($6, or $12 based on plan type) in the months you pay the contractor. 

To change a US employee to a contractor based outside the US:

1. Dismiss the US employee profile in Gusto.
   • They'll be removed from future payroll in Gusto, and;
   • After their dismissal date, they'll be considered inactive—you're only charged for the months an employee was active (even if partially).
     • Heads up: Because we bill in arrears (for the month prior), you'll typically still see an employee charge on the invoice that comes immediately after someone is dismissed.  
2. Add the person as a non-US contractor. 

Reminders

• Only individual contractors can be converted. Business contractors need to be dismissed, and then added as new employees.
• Offer letters and background checks cannot be sent if you're using the steps below to change employment type.
  • If you need to send either, fully dismiss the contractor, and add them as an employee.
• Once you change a contractor to an employee using the steps below, you can no longer send them contractor payments.
  • Make sure to process any final contractor payments before converting them to an employee.
• Only individual contractors can be converted (not business contractors).

Change a US contractor to an employee

1. Go to the People section.
2. Find the US contractor, and click their name to view their profile.
3. From the Work tab, find the “Work” section and click Edit.
4. In the gray box, click change worker type or country.
5. Under “Worker type” select Employee.
   • If you do not see this option (we're still rolling this out), fully dismiss the contractor, and add them as an employee.
6. Confirm, or change the country.
   • If you're employing someone globally, learn about adding employees outside the US here. 
7. Confirm or re-enter their personal email.
   • This is the email address that will be used to sign in to Gusto and receive personal info.
   • The email address cannot be the same as another employee's email.
8. Click Save and continue.
9. Enter new work information, like:
   • Where they'll work from
   • Work state
   • Job title
   • Department
   • Manager
10. Enter the contractor end date, and start day as an employee for your company.
11. Click Save and continue.
12. Skip to Step 8 (add compensation details) in these instructions to complete the rest of the onboarding.
    • If you're employing someone globally, learn about adding employees outside the US here. 

Error message help

If you see an error saying 'the SSN already exists,' check if there’s another employee profile with the same SSN as the person you're trying to add.

You should always consult a tax professional when correcting wages and payments related to misclassified workers—there are many factors to consider (e.g., tax implications, how payments are sent and recouped, etc). 

You may need to...

• Reverse payments made to the incorrect employment type
  • How to reverse employee payments
  • How to reverse contractor payments 
  • If you cannot reverse the payments, contact us from the Help section.
• Correct previous year tax filings—as needed
  • W-2 correction guidance
  • 1099 correction guidance
• Change the team member's employment type in Gusto
  • Change employment type
• Report missed payments in the correct profile
  • For US employees:
    • If they need their payment still: You can run off-cycle payrolls—be sure to adjust the check date to when they were actually paid.
    • If they already have their payment: Report the payments differently, as a non-gusto payroll.
  • For US contractors:
    • If they need their payment still: Learn how to pay them.
    • If they already have their payment: Record historical payments for 1099 purposes.