You might have heard a warning from your bookkeeper or CPA when discussing bringing a contractor on board. The IRS has outlined a series of differences between employees and contractors and misclassifying an employee as a contractor has serious legal consequences for a company.
Trying to figure out what the actual test is? Here’s the link to the IRS article.
Companies hire contractors instead of employees for a myriad of different reasons, the most common being contractors tend to be cheaper than adding to the employee headcount of a company. While a contractor like me gets paid a set project fee or a retainer for my services and my time, an employee comes with other financial requirements like benefits, vacation time, employment taxes, etc.
A contractor, also known as an independent contractor, freelancer or contract worker, is a person who operates under their own business and provides a service to third parties. Aside from the obvious IRS legal differentiation, there are some nuances to your working relationship with a contractor that you might not have considered before.
Contractors have autonomy
A contractor (like me) comes to an agreement with a client about the scope of work that will be rendered and the payment for the services. The contractor chooses their work venue (most times), their business hours and manages their own schedule.
While a contractor might choose to provide services Monday through Friday 8 am to 5 pm, they might also decide their hours are Friday through Tuesday from 7 pm to 4 am and the client doesn’t really have a say over that timeframe. As long as the contractor is satisfying the services and deliverables outlined in the scope of work and the agreement, the how and the when are not really up for discussion.
Contractors have multiple clients
Contractors usually manage multiple projects at the same time. Part of what makes contractors great is that they can provide a service for less than adding an extra employee. How we do that is by offering our time and expertise to a variety of multiple clients. We fit them all together like a tetris board, and that’s how we make our living.
When you’re managing an employee you know what their job description is, and you know they are available and ready to perform their functions as outlined in their description. Your project is always their most important responsibility and your tasks should always be their top priority.
The downside of hiring a contractor is that you cannot guarantee they will be available or waiting to perform a task for you with the expediency of an employee that’s sitting in the next cube over. In my specific case, my workday is usually pre-determined by 3 pm the previous business day; and it is very difficult to accommodate immediate turnaround times if we haven’t been given advance warning.
Contractors don’t represent the company
While I personally will always put my best foot forward when it comes to my clients’ clients, it is very rare for me to be placed into a position where I have face-to-face time with them. Most of my services are provided to my client, who in turn manages their relationship with their vendors, other service providers and clients.
As a business owner, I represent my own brand Storey Creative first, and I would never take charge of negotiating on my clients’ behalf unless it is specifically stated in my scope of work and responsibilities. For example, if I am going to find a printer for your brochure project, I will be responsible for bidding out the project on your behalf, and once you select a winning bid, I would be connecting you with that vendor directly to arrange for payment and delivery of the completed print project.
Contractors are hired for their expertise
Something you never have to worry about with a contractor? Providing continuing education. Unlike an employee, who needs to be trained to learn new software or processes; it is our responsibility as contractors to stay up to date with the latest tips and trends, as well as platforms and software in order to perform the latest and greatest of services for our clients. You will never foot the bill for conferences, classes, training, etc. when you deal with a contractor.
Interested in bringing a contractor on board? Let’s talk!