December is in full swing and I’ve had a busy schedule of meetings with my business clients. Many of them are coming in to plan for 2019. I really enjoy the positive discussions, especially with those businesses that are growing and looking to hire more help. Some are hiring temporary help for the holidays. But many of the businesses are looking at hiring for 2019 and beyond. The most common question is whether they should hire an employee or an independent contractor? They are two different classifications that each have different implications for your business.
What is an Independent Contractor?
Independent contractors are not generally paid with a steady paycheck. They normally work their own hours and have control over their schedule. As long as they deliver the product or project they are hired for, they are doing their job. Often they can be temporary workers, only assigned to work on a short-term project. Instead of using your equipment, they usually use their own computers and other technology. When materials are needed, they provide it themselves (rather than from an employer).
An independent contractor is not necessarily exclusive to your company. They may be doing many projects at once for a variety of companies.
What is an Employee?
If you have a person on your payroll, with a steady paycheck, that person is an employee. They normally perform work that is essential to your business. With a standard weekly schedule, they are working a full-time job exclusively for you. Unlike an independent contractor, an employee is “controlled” by the company. The company controls how the work is performed and how it is delivered.
For a company, this different also means that they must pay taxes, including FICA and federal and state unemployment tax. There are also disability and workers compensation premiums to be paid to your state’s insurance fund.
Who Do I Talk To?
For everyone who meets with me and is considering taking on an employee or independent contractor, my first question is what does their accountant say? Hopefully, they have a good accountant who understands their business. The accountant should have a good understanding of the tax situation of the business and what makes the most sense for them. I’ve often found that even though the business thinks one thing, the accountant can explain why the other option is better from a tax perspective.
Next Steps
If you or your business are considering using an independent contractor or hiring employees, give me a call and we can sit down to discuss how to tailor an independent contractor agreement or employment agreement for you or your company – (877) AMAYERS.
