POINT PLEASANT, N.J. - Sharp Payroll Service, a family-run payroll, tax, and accounting firm serving businesses across New Jersey for more than 30 years, is helping local employers prepare for new state regulations that tighten the rules on classifying workers as independent contractors. The regulations, adopted by the New Jersey Department of Labor and Workforce Development and codified at N.J.A.C. 12:11, take effect October 1, 2026.
The rules clarify how New Jersey applies its long-standing "ABC test," which determines whether a worker is an employee or an independent contractor. Under the test, every worker is presumed to be an employee, and the hiring business carries the full burden of proving that a worker is genuinely independent. Many businesses that rely on subcontractors will find that workers currently paid as 1099 contractors should instead be paid as employees through payroll.
"This will be very impactful for a number of businesses that use subcontractors," said Matt Contardi, Owner at Sharp Payroll Service. "Most of the individuals being hired as subcontractors would not pass the ABC test. Paying employees through payroll involves the extra cost of employer taxes, ranging from 10 to 13 percent of gross payroll, and businesses need to plan for that now rather than face back taxes and penalties later."
The ABC test requires a business to satisfy all three of the following to classify a worker as an independent contractor: the worker must be free from the company's control over how the work is performed; the service must be outside the company's usual course of business or performed away from all of its locations; and the worker must be customarily engaged in an independent trade or business. Failing any one prong makes the worker an employee under New Jersey law.
Misclassification can expose businesses to back pay, tax assessments, and penalties under the state's Wage and Hour, Wage Payment, and Unemployment laws. Sharp Payroll Service is working with New Jersey employers now to review their subcontractor relationships, move affected workers onto payroll, and manage the employer-tax side correctly ahead of the October 1 deadline. The change is especially significant for construction companies, which rely heavily on subcontracted labor.
"Our goal is to take the guesswork out of it," added Contardi. "We can run a business's workers through the test, set up compliant payroll, and make sure owners understand the real costs before the rules take effect."
Businesses that use subcontractors and want to understand where they stand can contact Sharp Payroll Service at (732) 458-3800 or visit https://sharppayrollservice.com.
About Sharp Payroll Service
Sharp Payroll Service is a family-run payroll, tax, accounting, and financial services firm based in Point Pleasant, New Jersey. For more than 30 years, Sharp has helped businesses across New Jersey save time and money with personalized payroll support, giving every client a dedicated specialist who knows their business. Learn more at https://sharppayrollservice.com.
Email: matt@sharppayrollservice.com
Media Contact
Name
Sharp Payroll Service
Contact name
Matt Contardi
Contact phone
(732) 458-3800
Contact address
928 Arnold Ave
City
Point Pleasant
State
NJ
Zip
08742
Country
United States
Url
https://sharppayrollservice.com/
