Small businesses often face the decision of whether to hire more staff or contract out work. There are advantages and disadvantages to both options. Hiring employees provides more control over work but subjects businesses to employment laws and regulations. Contracting out can reduce legal obligations but requires properly establishing the contractor relationship to avoid misclassification risks. Experts advise businesses to carefully review worker classifications, consider control factors, and put agreements in writing to minimize compliance risks in this area.
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Hire More Staff or Contract Out?
A Question for Every Small Business
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4. About the Moderator
Robin Fray Carey is the co-founder and CEO of Social Media Today, LLC, a blogging
network that assembles the world’s best thinkers on business and public policy. Carey
launched Social Media Today in 2007 with the goal of connecting leading experts
across a variety of business conversations. As traditional media went digital, and the
Internet went social, Carey realized the huge potential for social media platforms to
facilitate direct communication among customers, their employees, and experts from
academia, business and government.
Robin speaks on social media around the world, and blogs at socialmedatoday.com.
She has volunteered as a board member of the Women’s Refugee Commission, which
she now co-chairs. She is also an advisor to the Society for New Communications
Research, and a member of the Overseers of the International Rescue Committee.
These communities have attracted over 100,000 registered members and over half a
million monthly visits. Social Media Today’s advertising roster includes Fortune 500
companies like DuPont, SAP, Siemens and Microsoft. Carey also serves the non-profit
world, offering expertise and leadership as the co-chair of the Women's Refugee
Commission, member of the International Rescue Committee Board of Overseers,
and Business Advisor to the Society for New Communications Research. Ms. Carey
graduated with distinction from the University of Virginia, where she was an Echols
Scholar.
5. About the Panel
David Branch
David Branch brings more than 17 years of Staffing & Human Capital Management experience to ICon® Professional Services. As the
Vice President of Business Strategies, he is responsible for developing client services and expanding ICon's product offering around the
classification and management of independent contractors.
Jennifer Marion
Jennifer Marion is the Senior Advisor in the Office of the Administrator, Wage & Hour Division, U.S. Department of Labor, in Washington,
D.C. As the Senior Advisor, she is responsible for a wide range of activities related to policy development, analysis, and implementation,
with a particular focus on issues relating to immigration and the misclassification of employees.
Elizabeth Milito
Elizabeth Milito serves as Senior Executive Counsel with the National Federation of Independent Business (NFIB) Small Business Legal
Center, a position she has held since March 2004. Ms. Milito is responsible for managing cases and legal work for the Legal Center. She
frequently counsels businesses facing employment discrimination charges, wage and hour claims, wrongful termination lawsuits, union
avoidance and, and in most other areas of human resources law. She also provides and develops on-line and on-site training on a variety
of employment law matters and is a frequent media spokesperson on employment and labor matters.
Dale Jensen
Dale Jensen is an attorney with the Zobrist Law Group located in Charlottesville Virginia. Mr. Jensen specializes in employment law,
intellectual property law and litigation. Mr. Jensen and the Zobrist Law Group counsel numerous business clients of various sizes in
employment law matters.
6. April, 26 2012
Hire More Staff or Contract Out?
A Question for Every Small Business - Webinar
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11. Hire More Staff or Contract Out?
A Question for Every Small Business
Elizabeth Milito
Senior Executive Counsel
NFIB Small Business Legal Center
12.
13.
14.
15. The Perfect Storm
1. Higher
unemployment
means more
lawsuits.
2. Individuals are more
aware of their rights.
3. Emphasis on
enforcement.
16. State of the Nation
DOL estimates 70 percent of employers are out of
compliance on wage and hour issues.
17.
18. Don’t Get it Wrong
• Incorrect classification:
– IRS actively pursues
companies that
misclassify workers.
– State revenue agencies
will come calling.
– Liability for workers’
compensation costs and
unpaid overtime.
19. Independent Contractors
Minimize Risk
– Conduct regular reviews of Independent Contractor (1099)
Classifications
– Consider how much control your business has over
Independent Contractors: Is the individual generally told
(1) when, where, and how to work, (2) what tools or
equipment to use, (3) what workers to hire or to assist
with the work, (4) where to purchase supplies and
services, (4) that work must be performed by a specified
individual, and (5) what order or sequence to follow?
20. Independent Contractors
Minimize Risk
– Require documentation to establish that the consultant is
truly an independent contractor, such as business cards,
licenses, and certificate of insurance
– Put your agreement in writing – set forth the terms of your
relationship with a consultant to show the IRS and state
agencies that the consultant is an independent contractor
– Do not treat contractors like employees
22. Hiring Employees
An employee is a person who works in the service of another person
under an express or implied contract of hire, under which the
employer has the right to control the details of work performance.
When you hire an employee, the advantages are:
being able to completely control and direct that person's work
during work time;
to train the person in the way you want the job done;
to require that person to work only for you; and
typically more loyalty and team spirit than contractors.
When you hire an employee, the disadvantages are:
requirements to comply with many laws and regulations (e.g.,
laws regarding wages, overtime, work rules, unemployment
insurance, worker’s compensation insurance, and payroll tax
requirements, including paying half of the FICA taxes); and
typically more difficult psychologically to terminate relationship.
23. If You Decide To Hire Contractor
Make sure to have a written contract that thoroughly and
unambiguously establishes the relationship with the contractor
including payments and provisions for terminating relationship.
Consider only contracting with a corporate entity (e.g., an LLC):
governmental entities typically have some form of multi-factor
test for determining whether someone is an employee or
contractor, which can result in unexpected negative consequences if
someone you intended to be a contractor is determined to be an
employee;
if you contract with a corporate entity, a governmental entity will
typically have to get a court to pierce the corporate veil, which
typically requires some form of fraud or failure to observe proper
formalities – this is typically more difficult for the governmentally
entity to do than simply showing that an individual is an employee
rather than a contractor.
24. Thank you!
For more information about the
NFIB Small Business Legal Center contact:
elizabeth.milito@nfib.org
or
202-406-4443
25. Thank you to our
sponsor…
Visit the TriNet Hub on TriNet.com for free articles,
podcasts, whitepapers and on-demand webinars
focusing on HR and human capital management
http://www.trinet.com/hub/default.html
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