I have noticed a shift in the landscape of employment, or the lack thereof, since the recession hit our nation some years ago. As several of my friends and colleagues are just now returning to work, they are faced with a different type work relationship with the companies, firms and organizations they are accepting employment with. Specifically, the hiring process and work environments displayed through several recruitment efforts and job descriptions these days are swaying heavily towards that which is known as either a “Temporary to Permanent Employment” and/or “Independent Contractor” positions.
According the IRS, a general rule of being an Independent Contractor is “if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”
Some examples of most Independent Contractors include:
All of these are occupations of those who are in an independent trade, business or profession in which they offer their services to the general public are generally independent contractors.
According to the United States Small Business Administration, the characteristics of an Independent Contractor include: Operating under a business name, has his/her own employees, maintains a separate business checking account, advertises his/her business services, invoices for work completed, has more than one client, has own tools and sets hours and keeps business records. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
I had my first experience as an “Independent Contractor,” based upon an Agreement I signed, while in Law School. I was interning for free at an entertainment based company and was quickly promoted to a full time marketing employee, or so I thought. After I accepted the position, I received several documents to execute where I had to acknowledge that I was an “Independent Contractor.”
I was responsible for paying my own taxes (personal and self-employment) and agreed in writing that no employer-employee relationship existed. I instantly thought this was some major bulls*&^, because I was still responsible for being at the office at a certain time and my duties were dictated by my supervisor on how and where they would be completed. I quickly learned, after much probing, that ALL of my fellow colleagues were in fact deemed Independent Contractors as well.
However, the majority of them did not fully understand what this meant. Several of them thought the fact that no taxes were withheld from their checks meant they did not have to pay taxes.
Fast forward 10 years to now, and again, several of my friends are in the same position. They are opting to take “Temp to Perm” and Independent Contractor positions because that is all that is being offered as the economy recovers. The reasons for the spike in this hiring practice are vast. They include, but are not limited to, lack of resources within the company, hiring managers’ desires to test a candidate out before agreeing to full time/permanent employment (i.e. – flexibility in hiring and firing), savings in labor costs and reduced liability of the company. Many people are accepting these positions because there may be no other options. They still put in 8 to 12 hour days and their schedules are dictated by the companies, firms and organizations they work for.
Companies, firms and organizations can face certain ramifications for wrongly classifying Independent Contractors and Employees. They may be responsible for reimbursement of wages that should have been paid to the employee under Fair Labor and Standards Act, which may include overtime and minimum wage. Additionally, they may have to provide employee benefits (health insurance and retirement), pay back taxes and penalties for federal and state income taxes, social security, medicare and unemployment, along with paying worker’s compensation benefits to any misclassified employee.
There are pros and cons to being an Independent Contractor, and it’s all relative to how you desire your work environment to exist. Most entrepreneurs and those with an entrepreneurial spirit desire to have an Independent Contractor relationship with those companies they do business with as it is conducive to maintaining the several working relationships and clients they may serve. However, if it looks like and employee and acts like its employee, but it (you) signed an Independent Contractor Agreement, you may need to have a conversation and renegotiate the terms of working requirements and status.