| bottom-link"> | | | | your customer is satisfied withthe job or not. In |
| The time comes for every successful | | | | other words, although your customer may notpay |
| home-based business ownerwhen one person can | | | | you (the independent contractor) because she is |
| no longer do it all. In the early days of | | | | dissatisfiedwith the work performed by your |
| yourfledgling business you accepted that not only | | | | employees, you must still payyour employees |
| were you CEO, CFO, | | | | because they are not independent contractors |
| COO, secretary, treasurer and marketing director, | | | | -they are your employees and are entitled to be |
| you also had tobe laborer, receptionist, janitor, | | | | paid a fixed wage. |
| chief cook and bottlewasher. Thatis simply what | | | | If you are dissatisfied with their work, you can |
| you have to do when starting out. In fact, I'll bet | | | | fire them but youcan't decide whether to pay or |
| youworked harder in your "little home business" | | | | withhold their wages based on theend result of |
| than you ever did inyour former life as corporate | | | | the particular project. |
| whatever, right? But now the time hascome. You | | | | ADVANTAGES OF INDEPENDENT |
| have successfully taken your business past the | | | | CONTRACTORS |
| initial,maddeningly slow, frustrating start-up phase | | | | => Cost |
| to the point whereyou're seeing some growth ... | | | | As mentioned above, the main advantage of |
| so much growth in fact that you'refinding it near | | | | independentcontractors versus employees is cost. |
| impossible to keep all the balls in the air. | | | | You can get the sameor better service from |
| The time has come to hire some help. OK, but | | | | independent contractors for a lower hourlyrate |
| what kind of helpdo you need? If it's a secretary | | | | than you can from employees because you don't |
| receptionist, that's easy. You goout and hire | | | | have toincur all the add-on expenses that go along |
| yourself a competent employee. But what if it's | | | | with hiring employees. |
| someoneto carry out specific projects such as | | | | => Equipment and Materials |
| designing a website for agood customer you just | | | | In addition, you don't have to provide office space |
| can't service within the timeframe thecustomer | | | | or materialsand equipment to independent |
| needs? What if it's someone to create a | | | | contractors. As independentcontractors (who may |
| marketingprogram to launch your business to the | | | | also go by the terms "freelancers", |
| masses? What if it's abookkeeper to handle your | | | | "consultants", "self-employed", "business owners" |
| accounts payable, receivable andeverything else in | | | | etc.) areself-employed business people, they have |
| between? The difference between these types | | | | their own "tools of thetrade". If they're website |
| ofactivities and our secretary/receptionist | | | | designers, they have their own officespace, |
| example is that the formerare all specific projects | | | | computer and printing equipment. If they're |
| whereas the latter is not. | | | | gardeners,they have their own lawn mower, |
| When considering whom to hire for your project | | | | whipper-snipper, wheelbarrowand pruning shears. |
| work, you have achoice ... hire a full-time or | | | | => Legal Liability |
| part-time employee or hire anindependent | | | | At law, an employer is vicariously liable for the |
| contractor. By the time you include all the | | | | torts of his orher employees. This means that if |
| add-oncosts of hiring an employee (in addition to | | | | you hire an employee gardenerwho accidentally |
| wages or salary you needto add on federal and | | | | runs over your customer's pet cat in the |
| state payroll taxes, social security tax,federal | | | | drivewayof her home when the customer had |
| unemployment insurance tax, state | | | | made it clear that youremployees are always to |
| unemploymentinsurance, workers' comp premiums | | | | park in the street, in addition to suing |
| and employee benefits,not to mention shelling out | | | | youremployee for negligence, she can also sue |
| for office space and equipment), hiringan | | | | you, the employer, asyou are vicariously |
| employee becomes a relatively expensive option | | | | responsible for the acts of your employees. |
| compared tohiring an independent contractor to | | | | (And,by the way, this applies whenever your |
| do the same work. The add-oncosts of hiring an | | | | employee is acting withinthe scope of |
| employee usually add about 30-40% to thebill. In | | | | employment, whether under your express |
| other words, if you pay your employee $10 an | | | | instructionor not. If your employee has a car |
| hour, you'llreally be paying $13 - $14 an hour once | | | | accident when traveling betweenjobs and his |
| you include all the add-onexpenses. | | | | negligence at least partially caused the |
| In contrast, although you usually pay an | | | | accident,you're responsible to the same extent as |
| independent contractormore than an employee, | | | | the employee.) |
| that cost will still be less than an employeewith | | | | This is generally not the case with an independent |
| the add-on expenses. You may pay an | | | | contractor unlessthe independent contractor has |
| independent contractor | | | | been engaged to perform an inherentlydangerous |
| $12 an hour without any additional charges. Sound | | | | activity (such as blasting) or you have attempted |
| good? Well,read on. It's not as easy as it looks. | | | | todelegate to your independent contractor a |
| WHAT IS AN INDEPENDENT CONTRACTOR? | | | | non-delegable duty (suchas keeping a rental |
| So, what is the difference between an employee | | | | property you own in good repair for the benefit |
| and an independentcontractor anyway? Quite | | | | ofthe tenant). |
| simply, an independent contractor issomeone who | | | | In addition to minimizing legal liability for torts, hiring |
| contracts with someone else to provide | | | | independentcontractors also minimizes your liability |
| specifiedservices for a set price on terms and | | | | for other types of lawsuitssuch as wrongful |
| conditions outlined in thecontract. | | | | termination or job discrimination. |
| For example, let's say you hire a gardener to | | | | DISADVANTAGES OF INDEPENDENT |
| mow your lawn andget rid of weeds once a | | | | CONTRACTORS |
| week. Your contract (whether written or not)is | | | | There are two main disadvantages to hiring |
| that Joe Gardener will arrive at your house on | | | | independent contractorsversus employees. |
| Friday morning,mow your lawn, get rid of weeds | | | | => Misclassification |
| and generally tend to your garden. | | | | Far and away the most serious disadvantage is if |
| In exchange, you agree to pay Joe $40 for this | | | | you misclassifyemployees as independent |
| service each week. | | | | contractors. Merely labeling a worker asan |
| Joe supplies his own lawnmower, hedge clippers | | | | independent contractor is not enough. They must |
| and weeding tools. | | | | actually be anindependent contractor. |
| Joe decides what time he arrives and how long | | | | If you do misclassify an employee as an |
| the job takes (withinreasonable parameters). You | | | | independent contractor, youmust pay the IRS all |
| do not supervise Joe in his tasks ordictate to him | | | | back-taxes owed, plus interest, plus penalty |
| how they are to be done. Joe is an | | | | (12% - 35% of the total tax bill). |
| independentbusinessperson and you treat him | | | | Also, you expose yourself to an increased risk of |
| accordingly. The final productis either to your | | | | state audits whenyour terminated independent |
| satisfaction or it isn't. When he's finished, you | | | | contractor files for unemploymentbenefits. Never |
| payhim if you're satisfied with the end result and | | | | mind that you and your independent |
| you don't pay him ifyou're not. | | | | contractorintended that there be no employer |
| Contrast this with an employer/employee | | | | employee relationship, many'sthe disgruntled |
| situation. Let's sayyou own the business Joe's | | | | independent contractor who unilaterally decides |
| Gardening Service. You employthree employee | | | | torecategorize the relationship as one of employer |
| gardeners to perform services for your business. | | | | employee whenthe spectre of unemployment |
| As the gardeners' employer, you pay them a | | | | benefits raises its pretty head. In suchsituations, |
| fixed wage and youwithhold taxes, unemployment | | | | you'd better be able to protect yourself by |
| insurance and various otherbenefits from their | | | | proving thatthe arrangement was for an |
| wages to remit to the appropriate | | | | independent contractor and not anemployee. |
| governmentagencies. In addition, you provide your | | | | => Legal Liability |
| employees with the toolsand equipment they | | | | Unlike an employee who is limited to workers' |
| need to perform their work. You tell them whatto | | | | compensationbenefits, an independent contractor |
| do and supervise them while they're doing it. At | | | | can sue you for negligence ifthey're injured on the |
| the end of thejob they get paid by you whether | | | | job. That's what liability insurance is forthough. |