VOLUME 1, ISSUE 29
APRIL 16, 2003
Courtesy of ExecutiveAgent.com

TOP TIPS
Independent Contractor vs. Employee Checklist

The IRS has established guidelines in determining whether or not a worker can legally be classified as a contractor and paid on a 1099 or an employee paid on a W-2. The questions on the next page help determine who has the "right of control," in three areas: Behavioral Control, Financial Control, and the Relationship between the Business and the Worker.

Does the employer have control or the "right of control" over the individual's performance of the job and how the individual accomplishes the job? The greater the control exercised over the terms and conditions of employment, the greater the chance that the controlling entity will be held to be the employer. The right to control (not the act itself) determines the status as an independent contractor or employee.

Click here to view the checklist...

BOOK REVIEW
Flawless Consulting, 2nd Ed.
A Guide To Getting Your Expertise Used

Consulting guru Peter Block delivers a comprehensive guide to effective consulting in this revised and expanded industry classic. Offering trade secrets, keen insights, and practical checklists, Flawless Consulting is an essential resource for novice and veteran consultants alike.

After validating the importance of a consultant’s style and authenticity, Block proceeds step-by-step through all phases of a consulting engagement: contracting, dealing with resistance, diagnosis, data collection and analysis, delivering feedback, implementing change, and more.

New to the second edition are chapters on whole systems discovery, strategies for engagement, ethics, and how to balance learning vs. teaching and the pivotal moments for change.

Peter Block’s Flawless Consulting, Second Edition can be purchased through the Kennedy Information Consultant’s Bookstore for $39.95.


© 2005 Kennedy Information, Inc., a BNA Company.

INDEPENDENT CONTRACTORS

There are 8.6 million independent contractors working in the U.S., making up 6.4% of the total workforce, according to a February 2001 report by the U.S. Bureau of Labor Statistics. In periods of economic uncertainty, becoming an independent contractor may provide greater flexibility to pursue multiple project opportunities. In addition, companies tend to increase hiring of independent contractors during the leading edge of an economic recovery, before they can justify bringing on a full time employee.

Much has been written about independent contractors in recent years, due to legal cases in which companies incorrectly classified workers as independent contractors instead of employees. A true independent contractor…

  • Works with a number of clients.

  • Determines the best way to achieve the “final result,” as defined and agreed upon in a contract with a customer.

  • Pays his/her own taxes and files the required government forms.

  • Obtains a city license, business license, fictitious name or dba statement, along with any necessary permits.

  • Takes sole responsibility for withholding and paying Social Security taxes.

  • Obtains his/her own benefits including workers’ compensation, disability, etc. The independent contractor is not entitled to any typical employee benefits from any government agency.

  • Provides professional liability coverage as required by a client agreement.
Many executives do not consider independent contracting opportunities because of the perceived burden associated with obtaining benefits and managing taxes. However, several third-party organizations provide “Employer of Record” services for contractors. A typical Employer of Record service provides workers with:
  • W-2 statement

  • Invoicing and collections services

  • Payroll processing, including payroll structure flexibility to allow you to spread payments out over time

  • Tax withholding for employment, federal, and state taxes

  • Medical and dental insurance at discounted group rates

  • 401(k) retirement savings plan

  • Life and disability insurance

  • Worker’s compensation insurance

  • General and professional liability coverage
Some employers of record are glorified recruiting firms, while others allow contractors to maintain full control of job acquisition and fee negotiation. The Contract Employee’s Handbook outlines many of the issues associated with working and marketing yourself as an independent contractor.

If you are considering working independently, yet want to have a consistent employer of record for tax purposes or your credit history, an Employer of Record service may be right for you. The following organizations provide Employer of Record services:

 

 
 
Career Tips and Tactics is provided courtesy of ExecutiveAgent.com. Written in a brief, executive-style format, each issue contains executive-only career strategies and tactics.

View Previous Issues