[Jewelry making - Article 00756] - Re: [Orchid] Small business issues

[Don Rogers]

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>     I subcontract my help and pay their salary like I would pay a
>     vendor.  This gives them the opportunity to take their own tax
>     deductions and take on other jobs if they need to.  We have been
>     operating in this mode for quite awhile, and it works very well for
>     us. 

    This issue of independent contractors, contract employees, and
    regular employees is not something to be taken lightly.  There are
    many pit falls with making the decision of which is which.  From my
    days in corporate America during the downsizing of the early 90's,
    we got bit a couple times by hiring someone as an "independent
    contractor" and then finding out that by the rules, they were a
    regular employee and subject to all the rules,  including
    unemployment when they were terminated at the end of their term. 

    Basically, an independent contractor is one who is hired to perform
    a task.  You can give no work direction, or "manage" the person. 
    You can only hire them to do a specific task, and they are
    responsible for how  and when to do it.  All they have to do is do
    what you ask them to do and finish by a set date.  If you intervene
    in any of these steps, they become your employee and are subject to
    all the rules that apply.  IE you send a ring to a wholesale jeweler
    for repair or sizing.  You tell them that you want it sized up to a
    7 1/2, and that three tips need repairing.  They take the job to
    their shop and do it.  You pay for the job.  You have hired an
    Independent Contractor.  If you tell that person that you want them
    to work exclusively for you, and be available  Mon to Fri between
    8am and 5pm and you want to tell them which solder to use, and how
    to finish the joint, they just became your employee.  You are now
    giving work direction. 

    A Contracted Employee is usually hired from an agency.  The agency
    is responsible for managing the employee.  Again, you are
    contracting a task to be performed, and you can not manage the
    individual, that is the responsibility of the agency you hired to do
    the job.  This employee may work at your location, and use your
    equipment, but again, the agency is responsible for the employee. 
    Any issues with quality of work,  or other employee/employer issues,
    have to be address between the agency an the employee,  You can only
    "fire" the agency or require them to provide another worker.  If you
    have set up a contract with a person directly, then that person
    falls into the Independent contractor class unless you provide work
    direction. Then they are your employee. 

    There are a lot of tax issues, as well as other HR issues here.  For
    the small shop, if you have someone working for you, in your shop,
    they are your employee.  If you are leasing out a part of your shop
    to an independent contractor, you can not prevent that contractor
    from doing work for other people, even if you are providing the
    equipment.  It gets very sticky.   Getting caught doing something
    wrong can result in a lot of problems for you beyond having to stop
    doing what was wrong.  IE the unemployment issues.  You may be
    responsible for paying the employers share of the state unemployment
    taxes and possibly penalties for taxes not paid. You may also get
    bit because you didn't withhold income tax and social security
    taxes, and depending on the state, there might be other issues. 

    One more interesting thing here.  This applies to your children and
    friends who "help out" now and then as well.  They can become your
    employees. 

    As said in most of the other post on this subject, good professional
    advice from your CPA should be followed. If you don't have one, get
    one. 

Don



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