Independent contractor VS employee

[SJSFarm]

I'm starting my own business. It's been suggested that I serve as the manager only and not do the work myself (my mom is freaking out about me going into people's homes).

Anyhow, trying to figure out if I seek an independent contractor, what should the rate be VS the hourly rate.

I've looked and found the pay for part or full time employee for this job is 12-14 an hour. How much higher should I shoot for based upon an independent contractor having to pay for his/her own taxes and insurance?

Thanks for any thoughts on the matter.

[Blue Ridge]

Well, there is a wide variety of factors that could impact this. What kind of work? How skilled is the labor requirement? Is it typically done as an independent contractor? Are you looking for part time or full time? How much travel is required?

Depending on these answers it could be anywhere from 125% to 200%. Also remember that there is a difference between how much it is worth to you and how much it is worth to them to do it as an independent contractor.

If you can tell more about the situation, a more specific answer can be given.

[willow_girl]

There are some pretty strict tax rules that govern whether an employee can be considered an independent contractor. Better check to see whether the work you have in mind qualifies ... don't want to get into a bind with the IRS!

[Belfrybat]

You can only pay someone as an independent contractor if they contract out to more than one outfit. A friend learned that the hard way. His boss hired him as an independent contractor, but when he did his taxes at the end of the year he got nailed since he only had the one 1099. HIs boss paid a huge fine for that little "mix-up".

[willow_girl]

I don't think that is an official rule, but the fact that he only had the one 1099 may have red-flagged his tax return.

Here is some info straight from the horse's mouth: http://www.irs.gov/Businesses/Small-...or-Employee%3F

[SJSFarm]

Thanks, this is carpet cleaning. I was planning on hiring someone who already has a home cleaning business.
I own the equipment and will be doing the advertising and scheduling. I had planned on letting the person chose the jobs he/she wants and I'll take the rest.

I was looking at a percentage plus finders few for jobs he/she brings in.

[Blue Ridge]

Have you considered using a Temp Agency/Transitional Staffing Agency/whatever they are called in your area?

They will typically charge you a 33-45% fee over the hourly rate of the person. Depending on the agreement, this may also relieve you of legal liability for the actions of the employee while in a customer home. It sounds like you would be offering part-time work.

You DON'T have to use the temp agency to find your employees; although you can. But, if you have someone you would like to use, the agency will be glad to handle the payroll for you (for the fee). Also, they often will help with background checks and drug screenings, which may also be helpful reducing that liability aspect of placing people in other peoples homes.

Another consideration is that typically independent contractors are responsible for their own tools; and you mentioned using your carpet cleaning equipment.

The whole debate on employee vs independent contractors can be a little vague and often comes down to the decision of an IRS employee and their interpretation of the regulations. And these vary from industry to industry, as well.

[SJSFarm]

I never even thought of a temp agency! That's a great idea.

I actually have an appointment with the SBA about getting it off the ground. I'll ask them about the temp as well.

[where I want to]

Actually the main issue with an independent contractor vs employee is the control exercised by the worker. There are things that show control, like being able to hire others to do the work, choosing what hours work will be done, working for multiple people, provides his own equipment, prices his own work, advertising, etc. If enough of those factors exist to show he controls his work, then the worker is really self-employed as an independent contractor. If not, then he's an employee.
Calling people indipendent contractors when they are really under your control may not automatically raise flags but disgruntled workers frequently file for unemployment or worker's comp alleging that they were really an employee and are eligible for benefits. Then an investigation will happen.