What is the result of improper employee classification?

Improper employee classification can lead to significant legal and financial implications for an organization, which is why the identification of this option as the correct answer is crucial. When employees are misclassified—such as treating a worker who should be classified as an employee as an independent contractor—it can create issues regarding compliance with labor laws.

In instances of misclassification, employers may face fines from government agencies for failing to adhere to regulations that govern employee rights and benefits. Furthermore, these organizations may also incur a liability for back pay if misclassified employees were denied wages, benefits, or overtime that they were entitled to receive. This can lead to costly audits and settlements, ultimately impacting the financial health and reputation of the business.

The other options do not accurately reflect the consequences of improper employee classification. While options regarding engagement, streamlined payroll processing, and minimized administrative overhead may sound beneficial, they do not align with the realities of misclassifying employees, which typically leads to increased complexity and risk rather than efficiency and positive outcomes.