In any business hiring and managing employees is a difficult and challenging process. It is also a legal and bookkeeping nightmare and can cost a lot in terms of bureaucracy and record-keeping. You may be tempted, for good reason, to hire independent contractors.
Let’s address the nuts and bolts of hiring independent contractors versus employees.
Less Paperwork and Accounting
Hiring guidelines are far less stringent. With independent contractors, you aren’t extending an offer of employment and therefore do not have to establish the right to work; it is assumed. You will not have to keep extensive records like social security numbers, drivers license information, or passport copies.
No Taxes or Retirement
You will also not have to withhold taxes or even put them on your payroll. In fact, independent contractors are responsible for paying their own taxes and the only requirement you have is reporting what you pay them over the course of any given year. Check IRS rules for specifics.
With independent contractors, you will not have to administer their 401k or other types of retirement programs, whereas with employees, you most certainly will. There is high cost associated with the administration and record-keeping of such retirement plans.
Additionally, you do not have to provide disability insurance or unemployment benefits insurance for independent contractors; of course, these are added costs with additional overhead for program administration for employees.
Downside to Hiring Independent Contractors
There are some pitfalls to hiring independent contractors.
Firstly, while you do not have to provide insurance for various risks, it may be in your best interests to do so. For example, if an independent contractor works on your behalf in a customer’s office and injures himself or somebody else, you and your business may be sued; at the very least, the costs of defending yourself in court could be prohibitive. If you have thorough business insurance, you may find that your risks of said issues are passed to the insurance company and they are more likely to settle a claim before it ever gets to court.
Another pitfall with hiring independent contractors is that you cannot dictate with as much detail as you can with an employee the working parameters. Things such as work times, work days, and work apparel are not under your purview. If, at any time, you are not satisfied with how an independent contractor represents your company, you can simply fire (or not rehire) him and call it a day.
You cannot do this as easily with an employee, even in “at will” states such as California. Sometimes, it takes weeks and even months to terminate an employee, who can simply choose to sue you for wrongful termination and tie you (and your funds) up in court for months or even years.
Employee vs. Contractor
In the case of property management, your choice for hiring employees versus independent contractors is fairly simple: Run the numbers and see what works best for your situation. For landscaping services, it may be much more feasible for you to hire an outside company that to hire internally; there simply isn’t enough work on a weekly basis to hire an employee and hiring a part-time staffer may just not make sense given the level of effort required to place him on the payroll.
On the other hand, it may be a no-brainer to set up something with an independent contractor to come by once every week or two and perform the tasks necessary to keep your property looking beautiful.
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