Employee / Outside Contractor Issues Feed

Employee versus Contractor

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Many artists think that there is an extended gray area as to whether "help in the studio" (i.e. part time worker) is an employee or a contractor.  The I.R.S. does not see this as a gray area, but always as black and white, leaning toward employee.  The I.R.S. has specific guidelines online. If there is any doubt whether an individual working for you is an employee or outside contractor, the I.R.S. will say this person is an employee. I know I said this twice. It's really important.

The I.R.S. states "anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed."

In contrast, "an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the results".

51dZgYTDCgL._SL160_Quoting from the book Hiring Your First Employee, "The I.R.S. prefers to have workers classified as employees because it believes that independent contractors are relatively unreliable when it comes to paying taxes. If you treat a worker as an independent contractor, and the I.R.S. classifies that person as an employee, you'll be liable for employment taxes for the worker, and may also be charged a penalty for your erroneous actions."

 

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    Start Career Pay Day     © 2010
    Recycled tin cans, sterling silver
    rivets.
    Artist: Harriete Estel Berman    

For more information, read the details below. If your aren't sure...buy the book or get it from your library. It may be a valuable lesson you can learn.  My previous post was a book review of  Hiring Your First Employee by Nolo Press.

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Behavioral Control
"Behavioral control" refers to facts that show whether there is a right to direct or control how the worker does the work. A  worker is an employee when the business has the right to direct and control the worker. The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work. 

The behavioral control factors fall into the following categories:

  • Type of instructions given
  • Degree of instruction
  • Evaluation systems
  • Training

An employee is generally subject to the business’s instructions about when, where, and how to work.  Here is the IRS web page on Behavioral Control.

All of the following are examples of
Types of Instructions:

  • How to do work.
  • When and where to do the work.
  • What tools or equipment to use.
  • What workers to hire or to assist with the work.
  • Where to purchase supplies and services.
  • What work must be performed by a specified individual.
  • What order or sequence to follow when performing the work.

Degree of Instruction
Degree of Instruction means that the more detailed the instructions, the more control the business exercises over the worker. More detailed instructions indicate that the worker is an employee.  Less detailed instructions reflects less control, indicating that the worker is more likely an independent contractor.

Note: The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

Evaluation System

If an evaluation system measures the details of how the work is performed, then these factors would point to an employee.

If the evaluation system measures just the end result, then this can point to either an independent contractor or an employee.

Training
If the business provides the worker with training on how to do the job, this indicates that the business wants the job done in a particular way.  This is strong evidence that the worker is an employee. Periodic or on-going training about procedures and methods is even stronger evidence of an employer-employee relationship. However, independent contractors ordinarily use their own methods.

FULL DISCLOSURE: The book images and corresponding links are provided for your convenience as an affiliate link. IF you purchase a book through a link on this blog, it may generate a small percentage of income to support this blog.

 


Hiring Your First Employee - a book review .

If you have ever considered hiring additional help for your work in the studio, this book is for you.

51dZgYTDCgL._SL160_ Hiring Your First Employee, A Step by Step Guide by Nolo Press, answers nearly every question from beginning to end in the employment process.  It covers everything from job descriptions, job postings, and interviews to the more exacting issues involving taxes, withholding accounts, and workman's compensation.

Even though I have had people working for me for over 15 years, I still learned quite a bit more information that was effective and helpful.

My usual test for buying a book is if after reading the entire book (borrowed from the library), I come to the conclusion that I need to have the book as a convenient and ready reference in my future activities.

The layout of the chapters and subsequent information is very effective.  It starts out with Chapter 1 "Deciding Whether to Hire an Employee." This is a really important question to decide whether your "help in the studio" is an employee or an outside contractor.  The I.R.S. takes this issue VERY seriously. A lot of  artists try to slide by or "fudge" this situation. Personally, I don't think the risk is worth it. (Stay tuned for an upcoming blog post about employee vs. outside contractor to learn more.  It is usually very clear one way or the other. 

Start Career Pay Day Pin by Harriete Estel Berman suitable for a budding career.
   Start Career  Pay Day          © 2010
   recycled tin cans
   Artist: Harriete Estel Berman
   Pin available for purchase.

Subsequent chapters cover pay rates, employee benefits, workman's compensation, withholding and taxes.  All the  practical issues that employers need to consider. I personally thought that Chapter 5 "Getting Ready to Hire" about job descriptions and  finding employees was new information for me.  (I have always found my employees by word of mouth through the local Metal Arts Guild.) Chapter 6 then goes through screening applicants and the interview process. Our society has become so litigious that we all need to be extra careful in this regard.

There are several charts and lists of state by state lists of specific requirements. That was great. Just read what you need to know and move on.  Personally, I think that if you are considering hiring help in the studio or already have an assistant, this book should be your next investment to put your mind at ease.

CLICK ON THE LINKS in this blog post or side bar to find information about purchase. At the time of this writing, Amazon.com has the best prices (including used books), but this book Hiring Your First Employee may also be available through NOLO Press as an electronic book.

Stay tuned for more blog posts related to hiring assistants for work in the studio. Share your experience hiring employees or ASK Harriete a question.

Purchase of this book from Amazon.com is an affiliate link and helps support this blog as a resource for the arts community.