| There are many pros and cons that must be | | | | performed, you may well be liable for |
| considered by those thinking of hiring independent | | | | damages.Medical CoverageUnless you carry a very |
| contractors, and if those are not factored into the | | | | unusual policy, it is highly unlikely that an independent |
| hiring decision, there may well be legal consequences. | | | | contractor would be covered on your policy, yet |
| Of course, it is always wise to go over your plans | | | | workers' compensation coverage would take care of |
| with your attorney, so this article is not to be | | | | any employee who is injured on the job. Of course, |
| construed as legal advice but rather some business | | | | in return for that coverage, the employee gives up |
| alerts that need to be considered before making a | | | | his/her right to sue you for any injuries incurred. Such |
| decision.Of course, the first thing to do is to consider | | | | is not the case with independent contractors who |
| the job that is to be done, the duration of the | | | | can sue for damages if they are injured on the job |
| assignment, the pros and cons of choosing a | | | | because of your carelessness. (Years ago my |
| permanent employee and the pros and cons of hiring | | | | company was sued when the independent contractor |
| an independent contractor. Then, you need to make | | | | claimed that due to our carelessness, furniture had |
| certain that your classification decision will hold up if it | | | | been placed in her way causing her to fall and injure |
| is challenged by either your state's or the federal | | | | her back. Since no one was present when she fell, |
| auditors.Why Would You Want to Hire an | | | | we were found guilty and made to pay ongoing |
| Independent Contractor?The reason that drives most | | | | medical expenses until we learned that the employee |
| companies to decide to hire independent contractors | | | | had been practicing this ploy for a number of years. |
| is a simple one - money. There is no doubt that there | | | | We were released from liability. However, we were |
| is a definite financial advantage, and in most cases, | | | | out thousands of dollars before it was over, there |
| the company does save money for a wide variety | | | | was no insurance coverage, and the cost of suing |
| of reasons. Let's consider some of the expenses that | | | | her for the monies was greater than the loss. We |
| are almost always incurred when a regular employee | | | | then had to get the contract voided through legal |
| holds a position.· There is the 7.6% of the | | | | channels.)Copyrights - Yours or Theirs?Work done by |
| employee's total pay that will be your share of the | | | | an employee on company time (and sometimes |
| Social Security | | | | during off hours) belongs to the employer. Such is |
| and Medicare taxes. Obviously, this cost is one that | | | | not the case when such work is created by an |
| cannot be avoided. | | | | independent contractor unless there is an agreement |
| · There is also state unemployment | | | | between you and the independent contractor |
| compensation insurance to cover, and that amount | | | | providing for the work done to be copyrighted under |
| will vary from state to state. But, it must be | | | | your or the company's name. A number of |
| considered and cannot be avoided. | | | | companies build that language into their agreements. |
| · There is also worker's compensation insurance | | | | (For example, a major training company whose name |
| to be paid. | | | | has changed several times in the past few years, has |
| · If you provide health benefits, then that | | | | independent writers develop their role plays and |
| figure must be identified and factored into your | | | | sometimes the actual workbooks that will be |
| analysis. | | | | provided to their clients, and their contract language |
| · Retirement is another cost that is often | | | | goes beyond what is normally used. They have |
| ignored when the hiring analysis is being done, but if | | | | contracts that note that ANY work produced by the |
| retirement is offered in one form or another, it must | | | | writers during the contract period (which is on going |
| also be considered and added into the | | | | and has no definite cut off date) will belong to the |
| equation.Actually, those who have researched | | | | company. Since the writers are not on staff nor are |
| compensation, tell us that in most companies the | | | | they guaranteed any given amount of work, this |
| compensation package often equals 33 1/3%+ of the | | | | would mean that work done for any other clients or |
| annual salary of a given employee. This figure must | | | | for themselves would be the property of the training |
| also be added to your payroll cost.Flexibility Is A | | | | company. For some unknown reason, there are |
| Major FactorThere are a number of reasons why | | | | writers who are willing to sign and accept the fact |
| employers want the flexibility that staffing with | | | | that the company notes that "we never enforce this |
| independent contractors can give them::· | | | | agreement, so you don't have to worry."). It would |
| Seasonal work patterns. | | | | be very unwise to emulate that company's practice |
| · Fluctuating workloads for various reasons. | | | | since it would be a very questionable one if there |
| · Specific tasks that need to be accomplished | | | | were a lawsuit.Scrutiny Is Intensified When |
| but not on an ongoing basis. | | | | Independent Contractors Are UsedThe government |
| · Freedom from legal problems if it is necessary | | | | has a vested financial interest in your having as many |
| to let the worker go. | | | | employees on your staff as possible. After all, they |
| · Workforce expansion and contraction as | | | | are more likely to know who made what income in a |
| needed or wanted. | | | | given time period and are thus better able to get |
| · Specialized skills provide greater flexibility and | | | | their taxes collected from employees than they are |
| also immediate productivity. | | | | from independent contractors. It is less likely that |
| · Reduction in training time and related | | | | employees will be working "under the table" It is for |
| costs.Fewer "Rights" IssuesIndependent Contractors | | | | that reason that there are relatively frequent audits |
| do have protection under some laws, but the rights | | | | conducted to make certain that your reported |
| guaranteed to the employee are far greater in | | | | independent contractors truly are independent and |
| number and can result in numerous legal claims that | | | | have assignments and supervision patterns that fall |
| are both monetarily costly and time drains. Because | | | | within the required guidelines.Much to the surprise of |
| Independent Contractors are not employees but | | | | many business owners, it isn't only state and federal |
| self-employed business people, there are fewer laws | | | | taxing agencies that conduct audits. Let's look at |
| to consider. For example, the independent | | | | those who might have an interest in how you are |
| contractors are not covered (at least only to a very | | | | dealing with the issue:· The IRS (no surprise) |
| limited extent if at all) by the following laws:· | | | | · The state's taxing agency (again no surprise) |
| Minimum wage laws (in some states certain jobs do | | | | · The Department of Labor which has an |
| have a minimum pay rate). | | | | interest in wage levels and hours worked |
| · Race, national origin, color, religion, gender, etc. | | | | · OSHA which looks at safety law compliance |
| laws. | | | | · The National Labor Relations Board |
| · The right to form or promote a union. | | | | · The state's unemployment compensation |
| · Family leave time.In states where permitted, | | | | agency |
| employees can sue for wrongful termination, but | | | | · The state's workers' compensation |
| such laws only protect independent contractors if a | | | | agencyThe various agencies have repeatedly voiced |
| contract was breached and that breach can be | | | | concerns about those individuals who "work under |
| proven.Why Wouldn't You Want to Hire an | | | | the table," and their concerns cover a variety of |
| Independent ContractorIt sounds as if it is the best | | | | areas, but money is often the driving |
| of all possible words to use independent contractors | | | | force.Misclassifying your employees can be costly |
| instead of employees, but you need to look at the | | | | since it can result in stiff penalties being levied against |
| other side of the coin to be sure that is true for you | | | | your company-penalties that may well offset the |
| and your company. Let's consider some of elements | | | | monies saved in the first place.Summary:While the |
| that must be factored into your final | | | | actual monies paid to the independent contractor |
| decision.Independence Is a Key Reason People | | | | may be higher than those paid to an employee, this |
| Become Independent ContractorsIndependent | | | | fact needs to be weighted against other factors |
| contractors see themselves as independent business | | | | such as:· Performance time needed |
| owners, and they are. You cannot oversee their | | | | · Level of expertise sought |
| work nor dictate the approaches they use in the | | | | · Need, if any, for training time for an existing |
| same way you would for an employee. Let's look at | | | | employee |
| some of those differences:· They, not you, | | | | · Space and tools needs |
| decide the best way to operate and perform. If you | | | | · Immediacy needs |
| do interfere in the process, you may well have the | | | | · Fringe benefits |
| IRS deciding that you have an employer-employee | | | | · Demographics of the existing worker pool |
| relationship with the person. Of course, that means | | | | · Estimated project time spanRemember, there |
| that all of the costs outlined above are now going to | | | | is almost no job that cannot be performed by an |
| be incurred for this individual or these individuals. (One | | | | independent contractor, so it is up to you to |
| of the major companies in the Silicon Valley learned | | | | determine the advantages and disadvantages of |
| this to their horror when they identified their trainers | | | | entering into a contractual agreement with such an |
| as independent contractors but required that | | | | individual.Elizabeth Kearney, Ph.D. Sits on four boards, |
| corporate training materials be used, that the trainers | | | | writes a column for a monthly newspaper, is founder |
| maintain a given work schedule, and provided them | | | | of Kearney & Associates: The Experts' Alliance, and |
| with offices, phones, etc. The IRS stepped in and | | | | identifies issues for which solutions are sought and |
| disallowed several years' worth of deductions).· | | | | then she and the members of her Alliance design and |
| When you enter into a contract with an independent | | | | deliver related programs and/or consulting services. |
| contractor, that contract is binding on both the | | | | Liz specializes in strategic planning, effective |
| contractor and your company unless one or the | | | | leadership, and this award-winning author and |
| other party violates its terms. Although you may well | | | | professor was a John Hopkins Fellow. Three of her |
| have a right to fire an employee, such is not the | | | | books were Fortune Book-of-the-Month Club |
| case with an independent contractor unless he/she | | | | selections, and her latest book, Women Who Paved |
| violates the contract.· Although you can | | | | the Way, is already in its second printing. Liz was |
| reassess assignments, and the employee's | | | | selected in 2003 & 2004 as Businesswoman of the |
| assignments can shift and change, you do not have | | | | Year by the National Business Advisory Council and |
| that option when dealing with an independent | | | | by ABWA. She was one of fourteen business |
| contractor whose services are outlined and limited by | | | | owners who were honored in Washington, D.C. in |
| the terms of the written agreement. If you decide | | | | March of 2005, and in the same year, she was |
| you want other duties performed and fire the | | | | presented with the Ronald Reagan medal for her |
| independent contractor when those duties are not | | | | work with small businesses and their related issues. |