Boutique Teams: To Employ or Contract?
Your time, boutique, finances, and even business survival can be affected by whether or not you hire employees or independent contractors. Thankfully, choosing between the two doesn’t need to give you a headache. After reading this overview, you should know right away what’s best for you.
Why you want to get this right:
The IRS prefers employees to independent contractors. They’re more likely to get their dues that way. The rules for what defines an independent contractor are strict and if you mislabel an employee as an independent contractor, you will be liable for paying employment taxes.
Staying on the IRS’s good side:
Here as some general rules of thumb to get you started.
Signs you have an employee:
The boutique team-member has signed a non-compete clause. Independent contractors are technically self-employed and cannot generally be restrained in where they work. Independent contractors should however be asked to sign a non-disclosure clause.
You are understood to have the right (whether practiced or not) to control the manner in which the team member performs her job.
The team member is paid for her time.
Signs you have an independent contractor:
The team member is being brought on for a specific period of time, for instance to model or photograph a new collection.
You give your team member few and general instructions.
The team member has the right to refuse any tasks you assign him.
The team member makes investments in her own attire, marketing, etc that are not reimbursed by the boutique.
The team member is paid a flat rate or for her time.
The pros of independent contractors:
The biggest win with hiring an independent contractor is probably that you don’t have to cover the taxes, unemployment insurance, workman's compensation, benefits, and amenities you would with an employee. At the same time, independent contractors are often paid more, but you may still end up saving money, plus time and headache. Also, independent contractors should be fairly self-governing, so all in all you won’t have as many responsibilities. Lastly, with employees you have to consider the law of your state in hiring, firing, communication, minimum wage, etc. When you choose to have employees, you must get yourself educated.
The pros of employees:
This can be stated in one word. Control. You can control their uniform, how they sell/model/perform tasks. You can require an employee to substitute if another is sick. You can have your team members sign a non-compete clause. The biggest sign you should hire employees is that you have a very definitive brand and you want everyone fully on board behind the same vision.
Making the decision:
We’ve covered the main factors in considering whether an employee or independent contractor is best for your business and it should be obvious that you should also consider what’s best for you personally. The final piece of the puzzle is to consider what works best for your team members. After all, keeping them is what keeps your business running.