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Thread: Employee or independent contractor?

  1. #1
    Cyburbian Cardinal's avatar
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    Employee or independent contractor?

    I came across the following RFP this morning. I am no expert on teh subject, so I will put it to the Throbbing Brain. Would you consider this to be an independent contract position or an employee. The person is expected to work 40 hours per week (so effectively, no other clients), at a location chosen by the client, with a list of specific activities determined by the client, reporting to the client on a monthly basis.

    For what it is worth, I have no intention of pursuing this. When you consider what it pays, it is not worth the effort. Interestingly, though, I see many communities closer to home attempt to hire planning or economic development staff as contract employees, for 20 hours per week, at about $30,000 per year. Overhead should eat up at least ten percent of the total, and then you need to consider the self-employment taxes, health insurance, and other costs that need to come out of that sum. Sadly, many independent planners string together two or three of these kinds of positions to survive.

    The ---- extends an invitation to submit a proposal for economic development services as outlined below. This contract could be renewed annually for up to 3-years. There is a potential for the position to extend beyond three years.

    The independent contractor selected to fill this position would be expected to work 40 hours per week and to maintain regular office hours in a local office as selected by the ---- Board of Directors. Depending upon qualifications, the salary range could be as high as $60,000 annually. The contractor would be required to attend and report at all ---- board meetings as well as monthly member meetings.

    The overall goals of the program the independent contractor would manage are to:

    ✓ Maintain and create jobs in ---- County ---- by identifying ways to retain existing companies, expand existing local companies, assist new start-up companies and recruit outside companies to expand or move to the area.

    ✓ Research the landscape of resources, opportunities and barriers within the region and identify ways to enhance or eliminate as needed.

    ✓ Improve workforce skills by developing appropriate training resources.

    ✓ Increase awareness of the region to outsiders.

    The ---- Board of Directors has identified the following tasks and objectives:
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  2. #2
    Cyburbian Plus dvdneal's avatar
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    Sounds like a contract employee to me. I guess you get to skip out on paying insurance and pensions along with other benefits.
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  3. #3
    Cyburbian Cardinal's avatar
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    I should clarify. They mean to hire this person as a contractor, but does that description fit within IRS rules defining contract work versus employees?
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  4. #4
    Cyburbian
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    Quote Originally posted by Cardinal View post
    I should clarify. They mean to hire this person as a contractor, but does that description fit within IRS rules defining contract work versus employees?
    This seems pretty questionable to me, assuming the hiring authority is a public agency. How can they not pay payroll taxes on such a full time contractor? Also, State Unemployment Compensation Boards might have a lot to say about things like this.

  5. #5
    Cyburbian ColoGI's avatar
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    Quote Originally posted by Cardinal View post
    I should clarify. They mean to hire this person as a contractor, but does that description fit within IRS rules defining contract work versus employees?
    I think they got some bad legal advice.
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  6. #6
    Cyburbian Mud Princess's avatar
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    I wonder if that's the same RFP I received in the mail and tossed in the recycling bin earlier this week.

    So, they are basically calling all the shots, from the number of hours, to what meetings to attend, to the tasks to be performed... even where the person's office would be located. Sounds like an employee to me.

  7. #7
    Cyburbian Cardinal's avatar
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    Quote Originally posted by Mud Princess View post
    I wonder if that's the same RFP I received in the mail and tossed in the recycling bin earlier this week.

    So, they are basically calling all the shots, from the number of hours, to what meetings to attend, to the tasks to be performed... even where the person's office would be located. Sounds like an employee to me.
    Was the one you saw in southern Colorado or western New York? I also trashed that one right away.
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    Cyburbian Bubba's avatar
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    Quote Originally posted by Mud Princess View post
    So, they are basically calling all the shots, from the number of hours, to what meetings to attend, to the tasks to be performed... even where the person's office would be located. Sounds like an employee to me.
    Sound more like a contractor to me - what the feds (and federal contractors) like to call a FTE contractor.
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  9. #9
    Cyburbian
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    I think you can work full time as a contractor, where "full time" means number of hours per week, not number of hours per week with benefits. I did that in my OG job as a 1099, and I set aside money for quarterly taxes.

    I find it ironic that someone would work that many hours at a designated place with no benefits with the purpose of helping the agency find new employers for a community.
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  10. #10
    Cyburbian
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    IRS uses a bright line test, the generalities of which I copied from their website

    "Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
    Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
    Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?"


    Based on this, I don't really see how this position can be justified as a contract position.

  11. #11
    Cyburbian Cardinal's avatar
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    Quote Originally posted by Bubba View post
    Sound more like a contractor to me - what the feds (and federal contractors) like to call a FTE contractor.
    There is a distinction, too, between an independent contractor and a contract employee. An independent contractor is essentially self-employed. A contract employee technically works for an agency that holds a contract to provide an employee to the client. In this latter case the person is employed, receives a regular wage or salary, is covered unders workers' comp and unemployment, may receive or be eligible for benefits, has taxes withheld, and both employee and employer pay FICA. As described, the position could be legitimate as a contract employee. But as an independent contractor I do not think it passes the test.
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