| Business is booming and you have
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| | usually professionals who perform
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| determined that in order for your
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| | services for a company on a project basis
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| business to continue to grow, you need
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| | and then bill the company for those
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| additional help. You can no longer do it
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| | services and related expenses. The
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| all. The big question you need to answer
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| | independent contractor controls how and
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| first is not "Who should I hire?", but
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| | where the work is performed, provides
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| "What should I hire?" Do I need to hire
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| | their own tools and equipment and is
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| employees (full or part-time), temps,
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| | responsible only for the results.
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| independent contractors or should I out
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| | Employers have no tax liability for an
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| source the functions? Once you have
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| | independent contractor; they are only
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| determined the "What" you can better
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| | responsible for paying the invoice and
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| answer that very important question - Who
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| | reporting the payments on a 1099 form.
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| should I hire?You have several different
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| | When hiring an independent contractor it
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| options when it comes to hiring
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| | is best to spell out the expectations in
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| additional help for your business. As
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| | the form of an Independent Contractors
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| you look at the different options, you
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| | Agreement which includes a Scope of Work.
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| also need to be aware of the impact on
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| | There are many versions of an
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| your bottom line. What type of worker
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| | Independent Contractors Agreement
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| (employee classification) you hire makes
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| | available on the Internet. It is always
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| a difference. You may ask yourself what
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| | a good idea to have your attorney review
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| difference the employee classification
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| | it, since laws differ from state to
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| makes to your business. Employee
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| | state.The IRS has developed a subjective
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| classifications impact your business's
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| | 20 factor checklist for determining
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| bottom line - the classification impacts
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| | whether sufficient control exists to
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| salary expectations, benefits, and taxes.
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| | establish an employee-employer
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| It can also make a difference if you
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| | relationship. If the arrangement fails
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| inadvertently classify an employee
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| | the IRS review, an employer can be liable
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| incorrectly: your business can be subject
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| | for back withholding, penalties up to
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| to fines, penalties and back
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| | 100% of the back taxes, and other
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| taxes.Employee Classifications:Employees:
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| | statutory payments and penalties on
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| Employers typically have the most control
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| | behalf of the now designated employee.
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| over employees: you determine the hours
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| | If you have questions on whether an
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| the employee works, what they do and how
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| | individual is an employee or an
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| they do it. Employees normally perform
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| | independent contractor it is best to err
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| work at the employers location, the
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| | on the side of employee. It could be
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| employer provides the tools, materials,
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| | cheaper in the long run.Outsourcing:
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| and other equipment; they also provide
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| | Companies can outsource entire
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| training and supervision.Employees can be
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| | departments or functions such as
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| full time or part time; they can be
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| | shipping, human resources, bookkeeping,
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| salaried (exempt from the Fair Labor
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| | customer service, benefits
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| Standards Act) or non-exempt (hourly and
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| | administration, or computer networking to
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| eligible to earn overtime
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| | a firm specializing in that field. This
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| wages).Employers are responsible for
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| | can be cost efficient; the company does
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| withholding federal and state, Social
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| | not have to invest in new equipment,
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| Security and Medicare taxes from employee
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| | facilities or additional employees. The
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| wages, as well as matching Social
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| | outsourcing firm can work side by side
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| Security and Medicare taxes. Employees
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| | within the company or can work out of its
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| are entitled to certain mandated benefits
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| | own facility. Standards and expectations
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| such as Social Security and Medicare,
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| | are developed and for a flat fee the
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| Workers Compensation Insurance and
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| | outsourcing company handles the work. By
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| unemployment insurance. As the employer
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| | outsourcing non-core functions the
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| you have the option to provide other
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| | company can concentrate on its core
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| benefits such as healthcare insurance,
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| | business.Hiring StrategyAn important
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| vacation leave and tuition reimbursement.
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| | factor to keep in mind - you are not
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| By providing other benefits your company
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| | limited to one type of worker. By
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| becomes a more desirable place to work,
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| | determining your needs, you can develop
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| but you must be careful and evaluate the
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| | an overall hiring strategy comprised of a
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| return on your investment and the impact
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| | mix of staffing options. During the
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| to your cash flow.Temporary or Contract
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| | development of your business plan you
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| Workers: These are workers who are hired
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| | reviewed your potential staffing needs
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| on an as needed basis. They may be hired
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| | based on the needs of the business. If
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| to complete a project or to cover for
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| | you didn't create a business plan when
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| someone on vacation. Employers can hire
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| | you started your business, now is a very
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| temporary workers directly, however most
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| | good time to develop one. Even though
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| choose to use the services of an outside
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| | you may not be looking for outside money,
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| staffing agency. Staffing agencies often
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| | laying out your business plan for the
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| have a selection of candidates
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| | next several years, creating a budget and
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| immediately available. For a fee, the
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| | doing income projections will help you
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| staffing agency retains responsibility
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| | determine your staffing strategy. If the
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| for the compensation, payroll taxes and
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| | thought of all that makes your head spin,
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| benefits for the contingent worker. The
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| | your first hiring decision may be to
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| employer has the flexibility to add
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| | retain a professional, an independent
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| qualified staff with minimal exposure for
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| | contractor to help you work through your
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| tax liabilities. There is a premium
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| | business plan and hiring needs. You may
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| attached to this flexibility. The hourly
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| | save significant time and resources by
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| rates for workers hired through an agency
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| | hiring a consultant to help you with your
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| are usually 40% higher than the direct
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| | business plan and to identify job
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| hire rate, but you, the employer are not
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| | functions and tasks, skill requirements
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| responsible for withholding and other
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| | and qualifications.Once you are
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| benefits. For short term needs, this can
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| | comfortable with your business direction
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| be the most economical solution.Leased
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| | and budget ask yourself the following
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| Workers: Leased workers differ from
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| | questions:1. What specifically do I need
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| temporary or contract workers; they are
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| | that person or persons to do? Develop a
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| usually hired for an extended period of
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| | job description for each need which
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| time. Leased workers are obtained
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| | includes the following:a. Overall
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| through a PEO - Professional Employment
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| | responsibility - short sentence which
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| Organization. The PEO is responsible for
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| | covers the general responsibilities of
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| the financial and administrative
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| | the positionb. Specific areas of
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| responsibilities for the employees'
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| | responsibilityc. List of required
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| salaries and benefits; the employer is
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| | skillsd. Experience Requirements2. How
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| responsible for determining the hours the
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| | much time will that person need to spend
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| employee works, what they do and how they
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| | on the required tasks?3. Is this a
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| do it. Leased employees work at the
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| | permanent position or do I need this
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| employer's location, the employer
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| | person for a specific period of time or
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| provides the tools, materials, and other
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| | for a one time project?4. What equipment
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| equipment; they also provide training and
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| | do I need to buy or lease for this person
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| supervision. Because PEOs usually
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| | to come on board?5. Do I need to obtain
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| administer benefits and salaries for
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| | Worker's Compensation Insurance, a
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| large numbers of employees, they are able
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| | Federal Tax ID number, new facilities?By
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| to offer comparable wage and benefits
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| | answering the above questions and
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| packages to employees and charge the
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| | reviewing the various options open to
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| client company less than they would
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| | you, you are well on the way towards
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| normally pay. There are questions
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| | developing a hiring strategy and deciding
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| regarding "joint employer" status with
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| | who to hire! The next step in your
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| PEOs.Be sure to check with your state
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| | hiring strategy is to identify recruiting
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| regarding unemployment law; in
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| | sources. The next article will discuss
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| Pennsylvania leased workers paid after
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| | both traditional and non-traditional
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| July 1, 2005 are determined to be
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| | sources for workers. As always, it is
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| employees of the client company and the
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| | wise to consult your attorney or CPA for
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| client company is responsible for
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| | the specific legal and tax issues
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| reporting the leased workers' wages on
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| | affecting your new hires.Margaret
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| their UC Tax account (See Section 4(j)
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| | Catalfamo is a small business consultant
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| 2.1 of the PA UC Law). Prior to July 1,
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| | who provides practical, comprehensive
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| 2005 the state will apply a directions
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| | advice and support in the areas of
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| and control test to determine the
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| | Business Start-Up, Strategic Planning,
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| employer of record.Independent
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| | and Human Resource Services.
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| Contractor: Independent contractors are
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