If you are looking to expand your business, or just need some help on the occasional project, you”ll want to understand the difference between a contractor and an employee.
Basically, you have two choices when it comes to hiring. You can work with a contractor, or you can hire an employee
So, what’s the difference?
A contractor does not work for you regularly, only as needed, and typically own and maintain their own business.
An employee works for you regularly and exclusively. Both options have benefits and implications. So, thought must be given to what kind of help you are seeking.
To determine who is an independent contractor and who should be classified as an employee, look at three aspects of your employment arrangement: financial control, behavioral control, and relationship.
Generally speaking, an independent contractor retains control over their schedule and number of hours worked, jobs accepted, and performance of their job. In addition, they may have a major investment in equipment, furnish all their own supplies, provide their own insurance, repairs, and all other expenses related to their business. They may also perform a special service that is not in the normal course of your business. This contrasts with the situation for an employee, who usually works a schedule required by you and whose performance is directly supervised by you.
Some states have very strict guidelines surrounding the hiring of contractors. For example, in Massachusetts, you cannot consider someone a contractor if they do the same work you do. So, under Massachusetts law an organizing company cannot hire organizers as contractors, they must be hired as employees. It is important to learn and understand the laws specific to your state or country. Your state and local government should have employer guidelines available to you on their websites.
Control
If you are hiring an organizing contractor, they will likely have experience organizing and also their own style. You cannot set guidelines for the contractor based on how you would like them to work with your clients. You will not have trained this individual yourself, or hired them specifically based on all of your criteria, as you would with an employee.
You will find that contractors, because they have their own clients, will not always be available when you need them.
At the same time, you don’t have a financial commitment with a contractor because they are operating and maintaining their own business and have their own paying clients.
An employee will probably have a set schedule in terms of hours or days that they work for you, or they would be required to give you first consideration when availability is concerned and you will know what your employee’s schedule is at all times.
An organizing employee will count on you for some determined amount of income. You must take this into consideration before hiring a dedicated employee, not matter what their assignment is.
Taxes
If you are hiring a contractor, you will need to provide that person with a 1099 form at the end of the year so that you can deduct that expense from your taxes. If a contractor asks to be compensated without tax reporting, the answer is simply, no. You must follow tax laws to the letter. These issues can and will come back to haunt you. Never bypass tax laws in any case.
If you are hiring an employee, you will need to deduct employee taxes and pay employer taxes. You can do this yourself or hire a payroll company.
Make sure you understand the laws in your state before you hire anyone.
For more information on hiring, check out our program: Build a Winning Team for only $49! This program includes two on-demand courses, plus 10 necessary downloadable forms and templates. Learn more here: https://organizingu.teachable.com/p/build-a-winning-team
