Hiring Employees Questions.

paintr56

A little bit about my company. I have been supporting myself and family as a self employed painter since 1974. During most of this time my goal has been to get by and not work too much. I am firmly middle class a house two cars and a work truck, two kids in collage. I average by choice about 1400 hours a year.

Over the years I have tried hiring helpers and have always been disappointed seemed like I worked more hours and at the end of the week had less money in my pocket. I know a lot of the problem was on my end. I think I have corrected some of those problems. I would like to hire two employees this year and try to have them work on their own with out constant supervision from me.

I have a lot of questions for those that have succeeded at this. My biggest is what kind of return on investment is reasonable to expect?

I have hired through a temp help agency in the past a would like to hire direct this time. I am in IL. what kind of W C rates am I looking at and where do I obtain it? Is my part of SS 7.14 % and what else do I pay as part of pay roll? Do moost of you with just a few employees pay holiday and vacation, if so how much and how soon?

I a sure hope some one can help I will have more questions I am sure and would be happy for any additional advise you can add.

Thank You
Jim

quix07

Hire them as subs. You will save more money and they will make more. Pay them by the hour and 1099 them at the end of the year. Just make sure they get liability insurance. Its cheap for you guys.

Mike Finley

- license? Isn't that on the bumper man?

Jason Whipple

Sound simple enough You really should look into the laws of your state in regards to what makes a sub a sub and what the state considers an employee.

In ANY state that I know of, when you receive invoices for hourly work from subs, they might have the right to collect unemployment from you. I had a sub try and pull a fast one on me this summer and was enlightened on the labor laws in Vermont.

If you hire as a sub contractor, insurance is only the beginning. In addition, make sure they are registered in your state. Do not accept invoices with hours on them, make sure they give you an invoice with the job(s) they work on and a deception of work followed by a total amount. Make sure they give you a professional looking numbered invoice, not one of those hand written Jobie's. Lastly, do not write the check out to a person, make sure your making it out to there registered company name.

If you do need to track there hours, have them do that (hand written) on a separate piece of paper when they turn in the invoice.

Other than that, check state laws. Start with the labor department and then your insurance company. Your secretary of state may have good information on line as well.

Good Luck

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Historic House Restoration, Cincinnati, Ohio
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paintr56

Thanks for the suggestion but I was looking to do it right. Not skirt the law.

Jim

tnt specialty

quix07

there in no license for painters, "handymen", or carpenters in pa. sorry about the bad info. i'll have to check into the hourly contracts. so your telling me you can't work for time and material as a sub?????

Double-A

Sure you can work for time and material as a subcontractor, but the IRS can argue with great success that someone that is turning in hours and seeking only reimbursement for materials is more of an employee than a subcontractor.

The relationship is discussed in several IRS publications available on their website.

Who is a Common-Law Employee (Employee)?
Under common-law rules, 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.

Who is an Independent Contractor?
A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. She is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. Vera is an independent contractor.




The factors examined are behavioral control, Instructions given to the worker, training, financial control, type of relationship...




For more information, refer to IRS publication 15-A.

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"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006

paintr56

I am saying that the IRS says to qualify as a subcontractor the person would need to be running a business. Some of the things the IRS looks for are.

Does the sub have more then one client? Does the sub supply all their own equipment? Does the sub set their own schedule?

One thing they look at if they feel you are misrepresenting your employees as subs is do you have more then one sub working together. The logic being if you were subbing out work you would sub it to a contractor with the man power to do the job.

Now for the down side of saying your employees are subs when they are not running a legitimate business. You 1099 them instead of with holding taxes. This goes on for several years. Either you or the sub is audited and it turns out that they weren't paying taxes. The IRS at that point can and likely will determine that the "sub" was in fact an employee working for you and did not qualify as a sub. You are now liable for all taxes and additional fees. This probably won't happen but it has and could again.

Jim

quix07

thanks for the info. i'll have to pass it along and do some of my own research.

wackman

This is turning into a very informative thread.

So, what if I have subs that do good work and I have enough work that they just roll from one of my projects to the next. I'm happy with them and their production matches my needs so I don't need more than one sub, and my work load matches their manpower so they don't end up doing many, if any, jobs for anyone else.

Often I do have my ways of doing things and when I have this much work for them and an emergency arises I might ask them to drop what they're doing and go take care of it, they pretty much do it.

Can I somehow be considered to have common law employees?

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john elliott

I can only speak for England, but in general there can be as much variation between different states as between the US and England, but over here that sub would be an employee if the tax authorities became aware of the situation.

Generally speaking the tax authorities prefer employer/employee situations rather than contractor/sub contractor situations, because they make more money, so usually the onus is on the contractor to prove that the sub is not an employee.

The flag that the tax people look for is regular payments coming from one provider, and nothing much coming from anywhere else, that's the classic profile of an employee

John

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Ed the Roofer said "John too, in his crass and blunt demeanor.............."

copusbuilder

I use subs for my painting. They work for other people and come in and price the job. They carry their own insurance and buy their own paint.
I still make money off them and they are ultimately responsible for the customers satisfaction.
If you place them on other jobs and do it this way there are "no" negatives legally.
If you have them working with you at their side, that would be a bad move

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AkA Richard Cranium

tnt specialty

The one particular aspect of the independent contractor vs. employee determination process/aspect that is coming to light more recently, is the fact that there exists explicit language in both federal supreme court decisions, as well as state level statutes that basically state that person performing like services of their employer are employees, regardless of any other critiera.

It doesn't matter how much cannon-fodder the "sub-game" playing employer throws at the issue.....The fact of the matter, for example; Is that a person painting for a painting contractor in an employee....period; Regardless of any other criteria.

Now, a GC can sub other trades; A roofer could possibly subcontract sheet metal work & possibly get away with it. But that could be considered a "thin-line", as sheet metal is a vital/intregel part of roofing.....It's all up to the particular auditor/inventigator.

I hope the sub-game thing is squashed sooner than later.....Thier on the right track.

Floordude

Here is the guy that teachs his employees, to break the law. This is the reason there is so much HACK work done these days.

This is the guy I'd like to see pay big fines and never be in business again, while sitting in a 6x6 with 3 hots and a cot.

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tnt specialty

Putty Truck

Hire the best and pay top dollar for top talent. Set your sights high: 10 years local experience, references, good driver's license....everything you want an employee to be.

I set aside 50% more than their pay to cover all the taxes, benefits, bonuses, etc. and hopefully a little left over at years end.
Your local governemt will have all the legal stuff.

copusbuilder

I don't understand this comment. It is quite legal to sub out paint work if you are a painting company. Many people in all facets of construction practice this?

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www.etexasrentals.com
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AkA Richard Cranium

copusbuilder

Tough crowd
Do you sub any floor work out?
Do you have installers that lay for $$ so much a yard? Most floor companies do. Is that breaking the law?

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www.copusconstruction.com
www.etexasrentals.com
www.thelakevoice.com
AkA Richard Cranium

Double-A

You can 'somehow' be considered whatever an IRS employee with enough enforcement authority wants to consider you. The thing is however, they have to apply their own standards to your situation and you have to meet certain criteria before you run out of options and get hit with fines and penalties.

So what are these criteria? Take a look at the publication I mention. Look it over and you'll find the criteria in there along with examples of what they consider legitimate relationships and what they consider mislabeling of employees as subs.

If you have specific questions, the best person to talk to is your CPA. If he says don't worry about this, find a new CPA. If he answers your questions and then says don't worry about this then he's probably worth the money you're paying him.

The last thing you need is a CPA that won't explain why its OK to ignore the law and what the consequences of doing so are. You want one that will work with you to come into compliance as much as you can, for reasonable costs, as quickly as you can. If you're already in compliance, then whoopee. You have one less thing to worry about tomorrow.

Hope this helps

__________________
"My clients’ wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006