There are in excess of 26,500,000 small establishments in America according to the latest figures. Those are merely the ones the us government reports: for every one that is on the record books there are many others not on the books. People are quilting, making homemade projects, mowing and trimming yards, painting homes, and all kinds of other things without them showing up on a analysis that anybody has. With the overall economy being so troublesome, now more than ever they are going to do whatever needs doing to help make enough to survive on. Although the country’s economy is tough, if you’re an employer you still have to be very cautious that you be aware of the repercussions of whether or not the people who work for you qualify as contractors, employees, or something else.
A large number of businesses have employees and haven’t even figured it out yet. They believe they are paying contractors when, the reality is, it is an employer-employee connection. This happens because there’s a strong informal economy. If you want some odd tasks conducted in your home, you get in touch with the man with the ad in the paper or on Craigslist. When you wish a bit assistance getting your receipts together for income taxes at the conclusion of the year, you call your step-brother. We enter in and out of commercial working relationships all the time. It never occurs to most of us whether we’re creating an employee relationship or not.
Everyone knows either somebody that is being paid “under the table” or somebody who is paying another individual under the table. Sometimes it goes on for a long time, but once they catch up with you the penalties or fees can pile up. You may discover youself to be in arrears for everything you ought to have been paying, in addition to fees and accumulated interest. As a rule the reason paying under the table continues is usually there’s not a lot of money involved and it’s not a long-term partnership. Once the amount of cash increases and the relationship continues on for several years, it’s too easy for people to let the secret out. It’s just not worth taking the chance.
Having said that, it’s not difficult at all to find companies that keep people around in kind of a hazy partnership, notably small companies that can’t afford an accountant and all of the hassle that comes with employees. All too often it is not dependent upon what you wish to do. You have to make do with the materials you have. Life isn’t fair, and many times we must choose the lesser of two evils.
How do you know whether you have an employee or a contractor?
First thing you look at is function. Does the person operate basically on their own and in some cases help you too? Or do you define their function? Someone who builds houses should have his own aims, techniques, and processes for building a structure. He’ll almost certainly also have a registered business (if needed). His function is owned by him. You are just one of many customers he has.
Control is important. An individual who is a barber controls the actual time and location where they will trim your hair since they’re not your employee. You call and make time for an appointment and he checks to see if it will work. Likewise, an actual contractor controls their calendar and location. Need somebody to be in the office at 9:30am everyday and work until 4pm? If so you are taking a great deal of control that you wouldn’t have if the person was an authentic contractor.
How are you supporting your contractor? Though it’s typical for a contractor to be provided a place as well as perhaps equipment to work with, most of the time they don’t go to organization occurrences, get special incentives, receive ratings from management, or obtain other employee-type support from clients.
If you have questions, see a lawyer. I’m just providing some general guidelines taken from the IRS website. A contractor does not have to satisfy every point exactly. It’s a really difficult field and it’s easy to find yourself needing an attorney for lots of basic questions. Yet, if your contractor fails the test, the IRS considers them an employee whatever you might think about them, and regardless of their “official” title.
Many times contractors deliver the greatest freedom and range of flexibility with helping you in your efforts. It’s not essential to be concerned with overtime pay, workman’s comp, health coverage, or any one of an hundred other items. You just pay the cash and they get the job done. Therefore it’s worth choosing contractors if you can. Some businesses attempt to transform all of their employees to contractor status. If they meet the required conditions it’s definitely possible, but it is not much of a magic bullet. We’re back to seeing the lawyer again. Do not forget that employees that turn down the proposed new arrangement will be qualified to apply for unemployment benefits.
Thankfully you can hire contractors from all around the globe by using the world wide web without running into the same troubles you have employing employees that live nearby. There’s no limit with the quantity of contractors you can have. If you need somebody local but it still looks painful, try using temporary workers. You pay the temp service as a contractor, and then they deal with the employer duties. If you are not satisfied with the employee, you can release them without having to concern yourself with unemployment issues. It is a nice contractor-employee middle ground.
Whichever choice you choose, do not let the reality that money is sparse and the rules are complicated prevent you at the very least of knowing about the alternatives you have available. We all must take chances, especially little businesses in tough times. The trick is being sure they are informed risks.
If you’d like to read more about creating paycheck stubs to people both contractors and employees, take a look at the author’s blog. Or if you’d like things in more of a stream, there’s also the author’s tumblr page where he does all things business and payroll related.