There’s a time when we cannot handle the day to day operations without help. When that day comes we always have this question: Should I hire someone has my employee or just give out portions of the work in contract? Maybe if the work position isn’t there and what you have is just an unusual and seasonal amount of work, you could consider to give away contracts for specific tasks. I’m outlining some of the considerations that are made to define if the work relationship is employer/employee or Service Owner/Service Supplier:
- Ownership of working tools – An employee uses his employer tools (from computer to pencils) a contractor invests in his/her own tools and usually has large year expenses in tools.
- Chance of profit and risk – Does the person in analysis has a chance of making a profit, does it run a risk of having a loss due to bad debts, damaged equipment, materials or delays? What kind of operating costs does this person have?
- Independence/Integration – Does the person in analysis work exclusively for one person or company? How does he/she integrates in the business? It’s obvious that someone that works several months 40 hours a week for someone has a relation of employee/employer. Is there a service contract? Can the work be performed by someone else designated by the contractor?
- Control – Who has control? Does the employer have the right to hire/fire, determine the wage/salary to be paid, decide when and where the work will be performed? The fact that the Contractor is incorporated it’s not a proof of independent contractor status, it’s a proof of a work relationship nothing else.
If a contract relationship is established is really important to have a written agreement where the object, length, expectations and compensation are outlined.