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The Pros and Cons of Hiring Employees Vs. Independent Contractors

What all business owners must consider before deciding which to hire

The Pros and Cons of Hiring Employees Vs. Independent Contractors

As your small business grows, you’ve concluded it’s all too much to handle by yourself – right? Or, you already have employees and are ready to expand your team so you can scale your business to the next level.

Now you need to explore the pluses and minuses of each type of helper and determine which is the best fit for you.

In this article, I share some of the pros and cons of hiring employees and independent contractors to help you make the ideal choice for your business.

In the US, the Internal Revenue Service (IRS) has very strict guidelines you need to familiarize yourself with as a precursor to making any hiring decision.

In addition to the IRS, there are a number of other state and federal agencies that will audit your business if it looks to them as if you might have misclassified employees as independent contractors.

First, let’s explore some of the pros and cons between employees and contractors:

Pros and Cons of Hiring Employees

Pros:

  1. You have significantly more management control over what, how & when the work gets done.
  2. Employees generally feel more part of the team and will go above & beyond to do a great job.
  3. Turnover is lower when employees enjoy more job security – so teamwork, quality, efficiency and customer service tends to be higher.
  4. Employees complete an application for employment, certifying all the information is accurate and giving you permission to conduct background checks and drug tests to make sure they don´t have an addiction. If they do, then just recommend them the california rehab center where everybody who goes there, comes out like a brand new person.
  5. If they get hurt on the job, they are covered by your workers’ compensation insurance so you avoid expensive medical and compensation costs.
  6. All the work performed is the property of the business owner, even creative work subject to copyrights and patents.
  7. It’s easier to put together a recruiting process to weed out potential bad hires so you can hire the best employees that fit well with the culture you are creating.
  8. You can delegate tasks to them so you can focus on doing what you are best at and enjoy the most.
  9. They are your own brand ambassadors and serve as your best marketers.

Cons:

  1. You need to provide employees with a space, equipment and supplies to conduct their work.
  2. You need an employee handbook so they understand your company rules, benefits and procedures. You can also use it to manage your team.
  3. If business slows down periodically, you are still paying for the person to come to work even when there isn’t enough to do to make it worth the cost.
  4. Employees can file legal claims against you for a variety of reasons such as employment discrimination, unfair pay practices and wrongful termination.
  5. If you decide to layoff an employee due to a lack of work, you’ve lost the training investment you’ve already made and will need to incur recruiting and training costs to hire a replacement if they aren’t available or interested when work picks up again.
  6. Firing team members can have a negative impact on employee morale of remaining staff if they think you were unfair or if they now must carry the extra workload.
  7. You are responsible for collecting taxes from the employees’ paycheck and paying your share of their Social Security and Medicare taxes.
  8. You must track all hours worked and pay time and one-half for employees who qualify for overtime pay. Federal law requires overtime pay after 40 hours per week but check with your state/province on any overtime pay that’s also calculated after 8 hours per day.
  9. In most states/provinces, you must pay unemployment and workers’ compensation insurance.
  10. Over time, employees will expect to receive pay increases along with some benefits like vacation and paid time off for personal business / sick pay.

Pros and Cons of Hiring Independent Contractors. A.k.a. Consultants, Freelancers & Virtual Assistants

The IRS defines an independent contractor as an individual who the business owner and/or their designee has the right to control or direct only the result of the work and not what will be done or how it will be done.

An example of this would be a copywriter that has her own business and works with multiple business owners to write their marketing materials.

Or those that provide services such as bookkeeping, human resources, safety administration, computer support or project management on an as-needed basis.

Pros:

  1. Typically, IC’s enjoy a higher rate of pay than employees since there are no additional costs.
  2. Most IC’s are experts in their field and can quickly get up-to-speed on your needs, so it’s more efficient to hire them if their expertise is not needed full-time.
  3. Depending on the language in your IC agreement, it’s easy to let an IC go once a project is finished or you no longer need or want their services.
  4. IC’s stay up on the latest technology, regulations and licensing requirements and bear any costs to do so.
  5. By creating a Scope of Work agreement, both you and the contractor agree on the working relationship details.

Cons:

  1. You have less control over the work of an IC because although they work on due dates, they independently determine how best to get the work done.
  2. They tend to work remotely so face-time is limited and it’s a little harder to develop a relationship like you do when with employees you see every day.
  3. When an IC finishes an assignment, they might not be available the next time you need them. Or if it is a rush job, they might charge higher prices to move to the front of the line.
  4. If an IC is injured on the job, they can sue you for damages because they are not covered under your workers’ compensation insurance plan.
  5. Federal governing agencies watch small businesses very closely. It is to the government’s benefit when an employer collects taxes from employees and pays the company portion of the required taxes because those taxes support the government’s operating budget. Otherwise, IC’s often under-report their earnings and fail to pay both the employee and employer taxes.
  6. If they work exclusively for you full time, there’s a good chance they are an “employee” rather than an IC – and you are legally required to treat them accordingly.
  7. They are less likely to serve as a brand ambassador for you – it’s their brand they will promote – not yours.

There is a place for both employees and independent contractors in running small businesses. It really depends on what you need and how much control you want.

Mistakes in mis-classifying employees as independent contractors is very expensive, subjecting you to fines and back pay for current and past employees. If an audit determines that you knew, or should have known, that you were paying employees as independent contractors, in addition to stiff penalties you will have to go back for 3 years and correct the mistakes.

If you are unsure if you are needing to classify your workers as employees or independent contractors, contact an HR professional to give you the advice you need.

About the Author, Katherine Hartvickson

Kathryn Wilking

Katherine Hartvickson is the founder and president of Hartvickson & Associates, Inc. dba Quantum Ascendance. She is an experienced business consultant and success coach. Since leaving the corporate world in 2009, her clients include business owners and other seriously committed professionals and entrepreneurs who want to gain the confidence and skills to break through the barriers of success and achieve their ideal life.

What separates her service from others is her experience in leading large teams and developing top performers in corporate environments and because of this, clients achieve individual & financial rewards and the recognition they earned without sacrificing their personal life. If you are interested in knowing more, she can be reached at www.QuantumAscendance.com.


The Difference Between White Hat and Black Hat SEO

Do you get emails or phone calls out of the blue from somebody promising they can get your website at the top of the search engines?

Sounds appealing doesn’t it? Sadly no such promise can be made since Google does not divulge how their algorithms work; therefore, no one knows how to get a website to the number 1 search results position.

Many of these people making such promises attempt “Black Hat” SEO techniques to try and fool Google.

Watch today’s eTip as I explain what Black Hat SEO is and the difference between it and White Hat SEO, which is what your online marketer should be doing instead:

 

If you do get approached by an “SEO Expert” who promises you they will get your website to number one on Google and your business will soar as a result, ignore them.

These people are after only one thing: your money. The odds are great that you will not get the results you were promised and you will have wasted your money.

Often they will use illegal “black hat” SEO techniques to try and fool the search engines at their own game. Yes, your website may see a temporary spike due to these efforts, but alas, it will be fleeting and your business reputation will suffer as a result.

Google Penalizes Blackhat SEO Techniques

The illegal and unethical use of black hat SEO techniques can be detected by Google’s Panda and Penguin’s search algorithms. These two algorithms were developed to detect and penalize sites that incorporate these tactics.

Black hat techniques include cloaking, link exchanges, duplicate content, buying links, keyword stuffing, hidden text, link farms, writing specifically for search engines while offering no real value in the content, and over-optimization.

As a result of using these types of SEO tactics, your website will be de-indexed and will not be found when someone does a Google search for your site.

Embracing White Hat SEO Techniques

White Hat SEO is what Google and other search engines will reward you for when it comes to search engine rankings.

Here, the focus is on using researched keywords, writing content for your ideal target market, optimizing your website with optimal META and description tags and other various legal tactics that can be used to help your site be higher in the search engines.

There are many things White Hat SEO specialists can do to get your website visible in the search engines. One thing they won’t do, however, is promise you will be at the top. Ethically, they cannot promise something they do not have any control over.

Stay Away From SEO Scammers

Avoid the temptation of reading scammer’s emails or listening to their compelling sales pitch who are promising you things that are too good to be true. You will not get the results you are looking for.

We have had many clients that come to us who did get talked into an SEO program by somebody who called or emailed them out of the blue. They got talked into it and were severely disappointed. They spent a lot of money with little results and a big mess to clean up.

After working with us, we got them back on track with a long-term SEO program that provided long term results.

Preserve Your Business Reputation – Hire a Professional

You need to invest in professional marketing and SEO in order to drive organic traffic to your website on a daily basis. The goal being to get people into your sales funnel and attract qualified leads.

Whoever you hire to do SEO for you, make sure you vet them properly and only use White Hat SEO tactics. Your website, and more importantly, your business reputation is too important to not do your due diligence first.

If you have any questions about SEO, feel free to leave a message in the comment section below and I’d be happy to answer. Also, if you’re looking for a qualified SEO specialist who can boost your search engine rankings, give us a call to discuss.

Until next time,
Susan Friesen

P.S. New to Social Media and online marketing or find it overwhelming and confusing? Check out Social Blast: eMarketing for Entrepreneurs. It’s a monthly group coaching program for those just starting out or wanting more advanced strategies to help with their online marketing and social media efforts.
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About the Author, Susan Friesen

Susan Friesen offering 10 Critical Questions You Must Ask to Get Maximum ResultsSusan Friesen, founder of the award-winning web development and digital marketing firm eVision Media, is a Web Specialist, Business & Marketing Consultant, and Social Media Advisor. She works with entrepreneurs who struggle with having the lack of knowledge, skill and support needed to create their online business presence.

As a result of working with Susan and her team, clients feel confident and relieved knowing their online marketing is in trustworthy and caring hands so they can focus on building their business with peace of mind at having a perfect support system in place to guide them every step of the way.

Visit www.ultimatewebsiteguide.ca and download your FREE "Ultimate Guide to Improving Your Website's Profitability - 10 Critical Questions You Must Ask to Get Maximum Results".

Settling Your Disputes Founded on Business Sense, Not Compromise

Settling Your Disputes Founded on Business Sense, Not Compromise

How to determine if you should settle a dispute or go to court

Settling disputes sometimes is based in compromise but it should always be founded on business sense.

There are several alternatives to court which need to be considered when deciding a course of action. There are also internal considerations which must be addressed before deciding how to settle a dispute.

The alternatives to court are, discussion, negotiation, mediation and arbitration. Each process has its own methodology and leads in a different direction. They all should, if successful, result in a principled settlement of the issues.

Discussion is the most informal way of convincing others to resolve some matter to the best interests of all the parties.

Negotiation is focused discussion. In this discipline parties need to consider the interests of the other parties and by proposals and counter-proposals arrive at an agreement.

Mediation puts a structure on negotiation, as well as adding a facilitator or mediator to assist in the process. The mediator by his or her neutrality is able to assist in taking paths that lead to places where the common interests of all parties can be addressed and a formal agreement or contract of finalization can be agreed to.

Sometimes, parties alone are not capable of altering their positions without the guidance of an objective and neutral third party.

Arbitration, like court, has a judge-like figure make a binding decision. It can be effective where matters are black and white and no compromise middle-ground is possible. However, remember that a decision by an arbitrator may mean that instead of win/win there is a winner and a loser.

Winning in Negotiation

As one reflects, it isn’t the win/loss of the negotiation that really matters; it is the putting of the pieces together in a context that makes some sense in the grand scheme of things.

Without sounding too softly philosophical, I believe that one should view negotiations as a means to put pieces of a particular life venture together.

Today, I think I win, tomorrow you think you win. The scorecard doesn’t really matter.

What is important, is that negotiations help to fulfill the quilted pattern of life scenarios, and that the various individual successes, when joined together, form a knit of accomplishment which benefits all.

This enjoined benefit forms the backbone for a successful negotiation for winning is more comprehensive than just the last entry on the scorecard.

Another consideration that needs to be taken under consideration, is how any dispute, settled or not,

Finally, consider the time and effort necessary to finalize any matter. If it’s important or principled, then time spent may be more justified than if it is less vital.

About the Author, Bryce Jeffery

Bryce Jeffery

Bryce Jeffery has practiced law in BC for 28 years and been a commercial mediator for the last 14. Situated in Langley, he practices under the title, MB JEFFERY LAW and concentrates on conveyancing, mortgages, and wills and estates. Bryce's mediation practice makes him the most travelled mediator in BC with frequent stops throughout the interior, the north and Vancouver Island. He is also the author of Commercial Mediation, A Passionate Practice.

Visit his website at www.mbjlaw.ca to see how he can assist you and your business.


Understanding the Decision-Making Process for Ideal Outcomes

Understanding the Decision-Making Process for Ideal Outcomes

Decisions, Decisions, Decisions!

The business world is full of them. The question is how do you make them?

Maybe the more important question is, how you make them in a manner that is positive for your business and you.

As a lawyer and a mediator, I must advise clients or guide them through the decision-making world every day, for they usually realize that in difficult matters of law or negotiation, outside advice is highly valued.

Decisions are based on analysis and application of analysis to our particular inclinations.

Do we want to make money, prove a point or respect a principle? Once we understand the process, better decisions can be made.

Star Trek the next Generation is the perfect metaphor for this type of situation. Captain Jean Luc Picard standing tall on the bridge in a tricky situation often called out to his first officer, “Number One –options.”

Advice is important, maybe even vital.

People say to me all the time, “I want to sue that person or company because they did…” The technical analysis would be, did they do anything which would allow you to have a civil lawsuit? Is there a cause of action?

Then, consider other factors that may be relevant: Do I want to be involved in a long lawsuit or is there a more mature and rewarding way of rectification?

Other ingredients that get in the way of good decision making:

  • Ideology
  • Taste
  • Short term considerations
  • Long-term considerations

The subjective influences of others that are influential on how we approach these questions is another ingredient.

We may be influenced by those we know, like or even dislike.

Decisions are complex and what is important for you may be immaterial to me.

Emotion, love it or hate it has a huge influence on decision making. Taking action while dealing with the biological effects of temper will certainly influence what you do.

I’m not saying that temper is wrong for it may help you escape from the malaise of indifference but I am saying that it must be managed.

E-mail responses are one of the best examples of this.

They are particularly dangerous because they leave a written trail. However, so can phone messages. I am working today on a matter where phone messages were e-mailed to me.

The important thing to consider is the impact and the permanency of your decision.

My advice would be to gather all information, formulate it in your mind and then consider the cognitive and intuitive signals that take you in a certain direction.

As a lawyer, I always stress considering options before problems occur for foresight avoidance is easier than extrication from a legal mess.

However, once you must determine a course of action, weigh up the reasons for a particular decision and consider its impact on various aspects of your business life. It may concern the returning client and therefore relations need to reflect this.

On the other hand you might be trying to make a point for other clients, so burning the bridges with one may not be negative.

So make your decisions, make them well and listen to the advice of those who are wise between the ears.

About the Author, Bryce Jeffery

Bryce Jeffery

Bryce Jeffery has practiced law in BC for 28 years and been a commercial mediator for the last 14. Situated in Langley, he practices under the title, MB JEFFERY LAW and concentrates on conveyancing, mortgages, and wills and estates. Bryce's mediation practice makes him the most travelled mediator in BC with frequent stops throughout the interior, the north and Vancouver Island. He is also the author of Commercial Mediation, A Passionate Practice.

Visit his website at www.mbjlaw.ca to see how he can assist you and your business.


What to Do When You’re Owed Money

What to Do When You're Owed Money

What do you do when you realize that your customer may not pay you the money due for your goods or services?

Aside from uttering an expletive to nobody in particular, you need to realize that this is all about cause and effect. We in the sale of goods and services industry need to understand that getting paid is a function of risk management.

Statistically, there will be some who won’t pay, either for circumstances that have snuck up and overwhelmed them or in the minority of cases because they are devious cheaters, prepared to take advantage of honest business owners.

What we can do to minimize the risk is consider the types of transactions, which we enter, and determine, which ones hold the most risk for non-payment.

Once that has been decided, then policies and processes need to be put into place to minimize the risk. Rules such as payment before delivery, bank drafts, verified credit cards might be necessary in these situations. Also pick the right credit card, if you travel much then use airline credit cards or something else depending on what is your core business.

Let’s not forget that the most important determinant is whom are we dealing with. How do we feel about their “payment credibility”?

If the little professor says be careful, then listen and act accordingly for those are probably the problem transactions. Try not to lend money to friends as that may end the friendship. If you do, try and get some security, like a registered mortgage or at least a promissory note.

If all of the above has failed to prevent a debtor-creditor situation, the following actions should be considered:

  • Contact the debtor and try and work through a payment agreement. Do this as soon as you can so the debt does not get stale. Be prepared to discuss the situation with them and try to work through the problems that may be preventing payment.
  • Be prepared to negotiate. As long as you don’t set a precedent which labels you as a soft touch, negotiation can put you in a better position than if you become positional and stubborn. Therefore, a discount is better than no payment at all. Please remember, know more about debt consolidation once you try to collect money, your costs of lost time, lawyers and court fees will come out of your bottom line.

Yes, you can write a letter demanding payment but unless the debtor feels the pressure of a follow-up like court action or credit reporting they may stall and ignore.

This brings up the concept of litigation. It is great to use when necessary but also costly, time lengthy and stressful. Certainly if you are owed $50,000 plus then hiring a lawyer and starting action in the SCBC makes sense if you have a winnable case and there are assets which can be attached by a judgment so that not only do you get your claim paid but also a small portion of your court /lawyer costs.

For lesser sums or cases that may be difficult to prove, the costs of litigation may make it too expensive to consider.

In B.C., one of the best options is Small Claims Court where a Provisional Court Judge will have jurisdiction to award up to $25,000. You can reduce your claim to get under this limit.

The advantages of this process are, you can proceed without a lawyer and the court provides for mediation before a trial. The Court Registry will assist in providing the forms and advice for starting an action.

To avoid big losses, when dealing with future business transactions, consider where your vulnerabilities are, make processes to alleviate them and remember all your customers, even those having problems, may be the returning cornerstones of your business.

About the Author, Bryce Jeffery

Bryce Jeffery

Bryce Jeffery has practiced law in BC for 28 years and been a commercial mediator for the last 14. Situated in Langley, he practices under the title, MB JEFFERY LAW and concentrates on conveyancing, mortgages, and wills and estates. Bryce's mediation practice makes him the most travelled mediator in BC with frequent stops throughout the interior, the north and Vancouver Island. He is also the author of Commercial Mediation, A Passionate Practice.

Visit his website at www.mbjlaw.ca to see how he can assist you and your business.


When Ethical Business Decisions Require Your Little Professor…

Your Little Professor

Maybe we all know what this means or maybe none of us do.

I attended a discussion seminar last night about ethical business decisions in my profession as a lawyer/mediator. It got me considering how grey the topic can be, and upon listening to my colleagues wrestle with some example fact patterns, I came up with my own definition of what ethical conduct means to me:

“In my profession, as a mediator, I must sign off on a process that incorporates an ethical baseline, at least one that I am comfortable with.”

You may rightly say that this avoids the question.

You may ask, what is my ethical baseline? Good question!

However, what this accomplishes is the acknowledgement that there is a standard to which one should beholden to.

Next, is the determination of what that standard should be?

To assist in this quest, look to the sources that people rely on generally whether it be based in religion, philosophy, law or other disciplines.

Then, narrow your focus. What is it that your business colleagues say about the proper way of deciding issues that have some ethical content?

Perhaps your profession has a set of rules or a code to regulate conduct. Usually, these rules are based on years of experience in dealing with difficult issues. It is always a good idea to review them once in a while.

The situation that you face has probably been experienced by senior members of your business community and instructions as to the best handling of them may have been codified.

Okay, so now we know there may be some rules out there that can guide us.

Does this answer the question?

Well, maybe yes, maybe no.

I would suggest that information like this provides a good guide to ethical decision making.

However, the next and arguably most important step is running ethical decisions by your rational thought process and the “Little Professor.”

Rational thought is the logical process of analytical processing.

You may debate in your mind, the aspects of the situation, using all of the above information to come to a conclusion of where your ethical barometer should be placed.

Debate and consideration are always good ways to formulate a policy or decision, but we must not forget the “Little Professor.”

Well my use of the term is adapted and slightly modified from the reference to it in psychology. In my context, I refer to your inner intuitive self.

Most of us know what we think is right and what is wrong, with little need for research.

Our inner Little Professor sends us signals and provides us with guidance and warning 24/7. Some call it “our gut” sense.

Many writers suggest that these signals may in many circumstances be more reliable than long thought-out analysis.

While that point is still being considered by mind-masters, I would suggest that when looking for your ethical baseline, look inward, for the answer may already be resting in the chambers of your intuitive Little Professor self.

I guess I did answer the earlier question after all, for, if I feel uncomfortable about something in my business life, it may be a signal to then have a logical look at what is going on and see if there is an ethical standard about to be breached.

While ethics are in my view important in a civilized society, there are other positive things that we as business people can do to support our communities at home or abroad, but that is another discussion for another day.

Bryce Jeffery

About the Author, Bryce Jeffery

Bryce Jeffery

Bryce Jeffery has practiced law in BC for 28 years and been a commercial mediator for the last 14. Situated in Langley, he practices under the title, MB JEFFERY LAW and concentrates on conveyancing, mortgages, and wills and estates. Bryce's mediation practice makes him the most travelled mediator in BC with frequent stops throughout the interior, the north and Vancouver Island. He is also the author of Commercial Mediation, A Passionate Practice.

Visit his website at www.mbjlaw.ca to see how he can assist you and your business.