Employees virsus subcontractors

Discussion in 'Business Operations' started by ron monteith, Nov 2, 2003.

  1. ron monteith

    ron monteith LawnSite Member
    Posts: 7

    How many companies have employees or do they use them as subs. I know this is an issue with the government. What advice do you have if any?
     
  2. BRL

    BRL LawnSite Bronze Member
    Posts: 1,211

    Well, many companies are solo operators, have employees, hire subcontractors, or hire both employees AND subs to do things for them. Employees are very different entities than subcontractors. You can't "use" an employee as a subcontractor. My advice would be to determine what you need\have (employees or subcontractors, or both), and then follow all of the procedures that the government has issue with for your particular situation. If the government finds out you have incorrectly followed said procedures, the fines can be pretty large. The link should help you with this. Good luck!

    http://www.irs.ustreas.gov/faqs/page/0,,id=15917,00.html
     
  3. BRL

    BRL LawnSite Bronze Member
    Posts: 1,211

    OK I just read another post you made where you said you have 10 employees. I would assume that means you already know about the stuff at the link I provided then. So I'm not sure what advice you are looking for, as many of us here would be looking for advice from you actually. :confused:
     
  4. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    Hi Ron,

    Here is a quote from this site.

    "If the sub is simply working under your direction, or under the direction of your foreman, they probably are not subcontractors.

    To be considered a subcontractor, they basically have to perform the task without direct supervison. For example, if a contractor hires a painting contractor to paint a home, and gives the job requirements (perhaps type of paint, when to do the work, etc.), and the individual follows their own direction to complete the job within specifications, then this is a 1099 subcontractor.

    However, if an individual is hired and assigned a task each day, told how to do the job, perhaps using your company tools, etc. then this is a W-2 employee. "
     
  5. zz218

    zz218 LawnSite Member
    Posts: 22

    hope this helps came straight from a business class i took a couple of weeks ago.
    Independent contractor works for others(other lawn companies)not exclusively you. Independent contractor has own tools equipment and expenses.
    Employees are provided equipment / tools and reimbursed for expenses. employees are hired , supervised and trained by their employees.
     
  6. ron monteith

    ron monteith LawnSite Member
    Posts: 7

    Thanks for your help. That helps.
     
  7. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,830

    As an LCO it would be next to impossible to get away with using the old "but they're not really employees.... they're sub-contractors" bit to avoid taxes, workers comp. etc. It's a really stupid move.

    To help understand why, the IRS uses 20 basic factors to determine if someone is a real sub-contractor or if he is really just an employee. If you violate more than 2 of these factors, he's determined to be an employee and YOU get to pay for all the back taxes.

    Here are the 20 factors;
    20 Factors

    In this business you'd almost surely be breaking rules 1,2,3,6,7,8,9,10,12,13, 14,15,17,18 and 19. And likely most of the rest too. There aint no getting by the IRS. They are years ahead of you. Anyone thinking of trying this - DON'T.

    Hire employees the correct way. Pay your taxes. Pay your worker's comp. etc. Stay out of trouble.
     
  8. ron monteith

    ron monteith LawnSite Member
    Posts: 7

    Thank you for your response.

    Ron
     
  9. newleaflandscape

    newleaflandscape LawnSite Senior Member
    Posts: 348

    One thing you guys are overlooking. I use both employees and subs. Of course pros and cons to everything. Subs make me alot more money. Two problems with them though. By giving them work alot of times they will talk with customers and end up stealing jobs so da speak, but the biggest reason is workmans comp. Technically you have to provide subcontractors with workmans comp insurance. All of mine have their own though, and they fax me a copy everytime they renew it. Because if something ever happens and they are working on your job, even if it is one of their employees, you are responsible for the workmans comp in the end. I ended a relatioinship with one of my subs for this reason. I told him he had to have workmans comp ins for him and his employees. I told him I would need to see proof. First six months he did it, his policy expired and he refused to pay for it, so I no longer use him. If you can keep tabs on the subs though, they sure are nice. They make me alot of money. And certainly dont cost as much as employees.
     
  10. ron monteith

    ron monteith LawnSite Member
    Posts: 7

    I agree with the Subs. The question I have is, there is a fine line between Subs and employees. How do you pay the Subs, a percent of the job. Do they have their own tools. Do they only work for you. These are some of the problems I am facing between Employees and Subs. Get some examples.

    Ron
     

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