Compass Point Bulletin: Gaining an Employee or Independant Contractor?

If you bring someone into your business, give them the hours and times they will work and direct what they will do, then they are an employee. It should be a simple definition, yet many people are called independent contractors when they are really employees.

An example:
The simplest example of an independent contractor is the following: You are an acupuncturist, and you need electrical work done so you hire an electrician to do some work for you. As the acupuncturists you do not have the same skills as an electrician, you do not tell the electrician how to put in a new outlet.
The electrician charges you for the work he has performed when he has finished it using his tools.

You are probably asking- if it is so simple then why the confusion?

I believe it is due to taxes, a fear of unemployment and payroll taxes. Although I am not an accountant I am telling you there is nothing to fear. First, an employee is an expense and you can write off the payroll taxes as a business expense. Secondly, there are payroll services that can setup your payroll automatically, if you do not want to take the bookkeeping steps yourself.

So if you in the same line of work, control what the person does, give them tools, then you have hired an employee, not an independent contractor.

What’s there to gain?
Plenty! You will be complying with the law. I am aware that the IRS will make a determination if you do not know if you are an employee or independent contractor. However, the IRS is only used when a problem has arisen, for example an employee was marked as an independent contractor and now wants to collect unemployment.

But more than that – you will have someone who you can assign work to, those jobs that you do not have the time or skill for, like marketing or administrative work.

You will also be improving your profession by providing jobs in the that profession to show that it can lead to gainful employment.

If you want more information on this matter or sublease agreements then please contact TrueNorth Business Consulting.