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What
You Should Know About Hiring An Independent Contractor
Jul
3, 2005
Author: Tom Perkins - Business Development Coach and Certified
Personal Trainer
Hiring Independent
Contractors (ICs) in the fitness industry is a common
occurrence. There
are definite advantages to hiring ICs including the potential
to save money, greater flexibility in meeting your staffing
needs, and reducing your exposure to certain lawsuits (i.e.,
alleged job discrimination or wrongful termination).
When handled correctly, an IC can be a great addition
to your business.
The key to using an IC is
to avoid a few of the more common problems associated with
hiring an IC. First
and foremost, have a written agreement in place.
This protects both you and the IC and makes sure there
are no potential misunderstandings regarding the existing
relationship. Moreover, it clearly defines the IC as a
contractor and not as an employee.
Why is that important?
To answer that, we turn to
the IRS. If
you incorrectly classify an employee as an IC, you can
guarantee that the IRS and several other state agencies are
going to come knocking on your door. Fail to correctly categorize your employees and ICs, and you
can be held liable for employment tax, interest, and
penalties.
The IRS looks at a number
of factors in determining if an individual is an IC or an
employee. Here
are just a few:
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An
Independent Contractor: |
An Employee: |
-
can
earn a profit/suffer a loss from the activity
-
provides
the tools and materials needed to do the work
-
is
paid by the job
-
works
for more than company at a time
-
invests
in equipment and facilities
-
pays
their own business/traveling expenses
-
hires
and pays assistants, and
-
sets
their own working hours
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-
can
be fired at any time
-
is
paid by the hour
-
receives
instructions from the company
-
receives
training from the company
-
works
full time for the company
-
receives
employee benefits
-
has
the right to quit without incurring liability
-
provides
services that are an integral part of the
company’s day-to-day operations.
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Another important thing to
remember is that your right to fire may be severely curtailed
when hiring an IC.
In the situation with an employee, your right to fire,
for the most part, is unrestricted.
When dealing with an IC, your right to terminate is
based solely on the written agreement you have with that IC.
If you terminate the IC in violation of that agreement,
you could open yourself up to a potential lawsuit for damages.
Therefore, be sure that the grounds for termination
have been clearly laid out in the written agreement.
Finally, be aware that you
could be held liable for injuries suffered by and from the IC
while on the job. ICs
aren’t covered by workers’ compensation.
If they are injured as a result of your carelessness,
you could be potentially sued for damages. Additionally, you
could be sued for any wrong doing or actions on their part.
The best course of action, if you hire an IC, would be
to make sure you are insured against their actions and that
they maintain their own liability insurance.
The point of this article
is not to discourage you from hiring an IC.
It’s simply to make you more aware of the possible
issues you need to address when hiring an IC.
When handled correctly, a relationship with an IC can
be a beneficial arrangement for all involved.
With
a degree in Accounting, certified as a personal trainer, and
primary function as a business development coach; Tom Perkins
works with personal training departments, fitness
professionals, and management of health clubs in the areas of
sales, marketing, and promotion; operations and
administration, and staffing and human resource management.
With 6 startups in 15 years under his belt and over 20 years
of working with the fitness industry Tom leads companies to
profitability through Fitness Industry Solutions www.fitnessindustrysolutions.com.
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