Practice Management Member Conversations

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  • 1.  Contract Employee or Sub Contractor?

    Posted 07-24-2012 01:18 PM
    This message has been cross posted to the following Discussion Forums: Project Delivery and Practice Management Member Conversations .
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    I have a one man firm where up until recently all I required was part-time, contract labor and contract architects whom worked in my office space to complete projects.

    Fortunately, I have picked up enough work to consider a full-time architect to work with me as a Project Manager.

    I have a guy working for me that is doing a good job, however, in this unpredictable economy I am still reticent to hire this person full time. At the same time the strategy of contracting PM work has some issues. For example:
    - If he is contracting then he could contract with others at the same time.
    - Keeping track of hours is hard to do and it also runs the risk of busting the budget if the hours get out of hand on a fixed fee deal
    - Do I give him business cards with my firm on them?
    - Cell phone cost, etc.

    Other options I have considered are:
    - putting him on a retainer
    - asking him to come up with a fixed price to do the whole project and then marking it up as required to cover my overhead and make a little profit.
    - salaried employment  contract for a six month period or so to be extended as possible.

    Any input would be appreciated.

    Berry





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    S. Jones AIA
    Owner
    S Berry Jones - Architects
    Memphis TN
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  • 2.  RE:Contract Employee or Sub Contractor?

    Posted 07-25-2012 09:27 AM
    Two suggestions

    Check with your state unemployment office - we did an employee on a fixed term agreement.  Iowa in their wisdom still paid him unemployment increasing our unemployment insurance rate. 
    I talked to our professional liability carrier and our policy did not cover contract employees.  If you have liability coverage - talk to your carrier to determine if it provides coverage for the different options you are considering.

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    Robert Carlson AIA
    Principal
    Carlson Design Team PC
    Iowa City IA
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  • 3.  RE:Contract Employee or Sub Contractor?

    Posted 07-26-2012 12:08 PM
    The most simple example I have been given is:
    If a licensed architect is still only doing drafting work on someone else's drawing, and no independent design, he/she still a non-exempt employee who must be paid by the hour.

    We send 1099 forms to agencies, but our agencies do withhold taxes, provide benefits, pay unemployment, and provide W-2s to their contract employees, so we do not have to.

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    Mike Webber
    Michael A. Webber
    AE Finance
    801 67th St.
    Downers Grove, IL 60516 USA
    C 1-630.732.5423
    mawebber@amkw.com


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    Original Message


  • 4.  RE:Contract Employee or Sub Contractor?

    Posted 07-26-2012 02:44 PM
    There are some pretty specific IRS rules regarding employee vs. independent contractor. Basically, if it looks like an employee, it's an employee. Do they work in your office, use your equipment, have established work dates/hours, and work under your direction? Regardless of how you pay them, they will be regarded as an employee. 
    http://www.irs.gov/businesses/small/article/0,,id=99921,00.html/ 


    If you do not want to make a long-term commitment, you could hire the person as a "temporary employee," or on a per-project basis. If you cannot keep them, it will ding your unemployment insurance account, but in the long run it's less expensive than a payroll audit and possible penalty and fines.

    If you use the person as an independent contractor, and your company is their only source of income as reported on a 1099, that is also a red flag. (As someone else said, if they have multiple sources of income and their own business entity, and if they are not working in your office, they could be considered an independent contractor if they meet the guidelines.)

    In our annual workers comp audit, we report independent contractors (who do not already have their own insurance), and we are required to pay premium based on their compensation.

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    Betsy Nickless, SDA / CDFA
    SDA-Orange County Chapter
    Mark Scheurer Architect, Inc.
    Newport Beach CA 



    Original Message


  • 5.  RE:Contract Employee or Sub Contractor?

    Posted 07-25-2012 09:47 AM
    Berry,

    You're in sticky wicket territory! First and foremost talk with your attorney and or accountant about the definition of employee as it applies in Tennessee and to your situation.

    If the person is licensed or has already established a business enterprise, satisfied state government filing requirements; has a track record of providing "drafting" or "project management" services; has business cards; has a business location (home or otherwise) and has been filing income tax returns as a business chances are pretty good you can contract (in writing) with him/her on whatever basis you want.

    However, if the person doesn't meet those criteria and you are providing them a place to work; providing them with business cards with your firm name on them; directly supervising and controling their work effort and work hours they are likey an "employee" in the eyes of the law and the work force flexibility you seem to be wanting to achieve is out the window!

    Good luck. Been there, done that, and have tattered and torn tee shirts to show for it!!


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    Thomas Zimmerman FAIA
    Architect/Consultant
    Z2 Architecture, PLLC
    Canandaigua NY Canandaigua, New York
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  • 6.  RE:Contract Employee or Sub Contractor?

    Posted 07-25-2012 12:03 PM
    Congratulations for growing your business to where you have to ask this question!  I  am a sole proprietor and I have been pondering the same question.  I recently heard advice that suggested hiring your opposite, somebody that  likes to do the things you don't like to do.  Thus, freeing up your time to allow you to work in your expertise, develop your authority, and to further develop your client base.  Personally, I see my first employee as somebody who can develop marketing, proof, process agency communications, prepare proposals and invoices, assemble color boards, and other office management tasks.  My goal with that employee would be to develop my business to where I am confident that I can hire professional staff.  I see there being a loyalty risk to any form of contracted, retainer, or temporary work.  If the job is temporary they will always be looking for the next gig.  Based on your sub contracting history, I'm curious if you agree.

    Thanks for the discussion topic.

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    Steven Byars AIA
    Owner
    Byars Architectural Services
    Davis CA
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