The world of work is changing rapidly, creating new ways of working, new ways for employers to get work done.   

For both companies and employees, the need to have quick and easy access to talent and work, has created a new way of working outside the traditional employee-to-employer relationship.  Independent contractors, often called 1099’s, are people who work assignment to assignment, project to project.  Currently, this workforce is estimated to be 16 million folks, and by 2015 is targeted to be 21 million.     

Unfortunately, the legal and financial ramifications of this growing new workforce have not escaped the attention of taxing agencies who want to protect the revenues generated from a W2 employee base.  W2 employees have their taxes withheld at each paycheck and their employer pays most, if not all, payroll taxes on their behalf.  The IRS and multiple state taxing agencies are now challenging the validity of the “independent contractor” status, ensuring that employers are not using a worker’s preference to work independently as a way to avoid otherwise mandated tax calculations, payments, and reports.  When employers organize work in ways that blur the distinctions between their W2 and 1099 workers, they are often doing so without being fully aware of the risks of creating a basis for a misclassification audit, which can be costly for both employers and 1099s.     

We have prepared the following Q and A to outline the issues employers are likely to face when defending the classification status of their 1099 workers.  Make no mistake, if you are a large or significant user of the 1099 worker model, there is likely a state or federal taxing agency who either has you and/or one of your 1099 workers on their radar as we speak.    

Why independent/1099 workers?

The independent/1099 worker provides employers with all the traditional benefits of flexibility.  They are paid only for hours actually worked or in some cases results produced.  Savvy independent contractors price their services at a level to appropriately cover the costs of taxes and benefits, so the per-hour rate is often considerably higher than applied to their W2 employee counterparts.  Employers are willing to pay the higher rates preferring a process where there is little to no paperwork for them, no hidden costs, and no complicated benefit packages to administrate.    

Convenience aside, the most frequently stated reason why companies hire independent contractors is that it has become a workforce made up of highly talented and sought after technical and managerial professionals—many calling themselves consultants.  Most 1099 workers have not only fully mastered their craft, but because of their exposure to a wide range of project and organizational challenges, have created profiles with the skills, expertise, and talents that are highly valuable to most employers.       

Why do workers choose to work as “independent contractors”?  

The popularity of independent contractor status within the employee community is also growing exponentially.  At some points in their career, workers like the exposure they get to a wide range of technical or professional challenges, plus the flexibility that comes from being able to work when they want to. 

For many professionals, the higher per-hour pay they can earn as a “consultant,” in addition to the deductions they can take on their individual tax return for certain business expenses not normally deductible to a W2 employee, creates a level of financial security they would not be able to obtain working as a W2 employee.    

What is the difference between an independent contractor and a regular W2 employee?   

Theoretically, the two types of workers should be noticeably different in terms of when and how work is performed, how it is financially transacted (by invoice or paycheck), and the length and scope of the working relationship between worker and employer/client.  In the real world, however, the differences between the two types of workers are not always that easy to discern and often comes down to a determination of whether or not the independent worker has legally created their independent contractor status (business license, tax id numbers, professional liability insurances, etc.).  Given this breakdown between theoretical intent and pragmatic execution, the intended distinction between the truly independent and the truly W2 worker populations has been blurred, creating real consequences for worker misclassifications at an alarming rate.     

If I classify a worker as an “independent contractor” do I avoid having to pay all payroll taxes?

Not really.  A nuance and little known aspect of Washington State law is that employers who use Independent Contractors to perform personal work are required to pay the Workers Compensation insurance and the state’s SUTA tax on hours and dollars paid to these 1099 workers.  Only if a 1099 contractor is a fully licensed and incorporated business entity (an LLC for example), paying the required business revenue taxes, can these costs be avoided.    

Bottom line, classifying an individual worker as a 1099 in the State of Washington does not automatically bypass the employer’s responsibility to report hours of work for workers compensation insurance or earnings that are used to calculate and pay Washington State’s SUTA tax.  There is more involved before those taxes can be fully avoided.

Why do we need to classify workers correctly?     

The issue at stake revolves around an employer’s obligation to calculate and pay taxes for W2 employees that they do not have for independent contractors.  For their 1099 workforce, employers pay an invoice and there is no withholding for federal or state income taxes, calculation and payment of social security, Medicare or unemployment taxes.  If a worker is originally classified as a 1099, but under audit turns out to be an employee, the employer is often subject to back taxes, fines, and penalties. 

The liabilities associated with a misclassification audit are both unforeseen and expensive.  Since September 2011, the IRS has collected 9.5 million dollars in back taxes, penalties, and fines from employers who have misclassified more than 11,400 workers.     

How do you “test” if a worker is a W2 or an independent contractor?     

One of the common misperceptions with 1099 workers comes from employers who believe that if their “contractor” is legal, (i.e. they have the proper business licenses, UBI (tax ID) numbers, insurances, etc.) and a contract between themselves and their contractor that labels them “independent”, they  meet all aspects of the 1099 test.  Most taxing agencies, on the other hand, operate from the belief that the “legality” of the claim of independent contractor status lies with the nature of the work to be performed and the degree of control the employer has over how and when it is performed—not the legitimacy of the contractor’s right to work as an independent contractor.   

There are a number of tests that are administered by different state and federal taxing agencies to determine if a worker is really an independent contractor or a W2 employee.  Unfortunately, not all of these tests are fully compatible, nor is case law clear on how any test can be applied, making the whole landscape of proper classification a slippery slope.  

In the end, most of the classification tests come down to:

• The degree of control the company has over the worker’s behavior.  The more control an employer has over where, when, and how work is performed, the less likely the worker can be considered “independent.”  Employers who place their independent contractors on work teams with required hours of work, mandatory attendance at meetings, and required collaborations around work products, often do so at the risk of having that independent contractor be re- classified as a W2 employee.   
• The degree of control over a worker’s financial opportunity.  The more control an employer has over a worker’s source of income, the less likely that worker will be found to be “independent.”  An agreement to pay a fixed cost per week, for example, can be just as suspect as an agreement to pay an hourly rate if the agreement includes a provision to work 40 hours/week—both tie a worker to a single source of income for extended periods.  Other considerations related to “financial control” include payments or reimbursements for business expenses, equipment or tools.  The more these sources of income are directed and controlled by the company/client, the less independent a worker will appear.
• The type of relationship (exclusivity or duration) that is formed between worker and company.  Case law around the permanency of a relationship suggests that work assignments intended to last six months or longer make the independent status more suspect than shorter term work arrangements.  A related factor is whether or not the worker is free to pursue other business opportunities during the term of their agreement.  Companies who regularly entertain independent contractors who work a regular 40 hour work week, and for years at a time, are clearly stretching the definitions of “independent.”   

What if I misclassify?      

The first thing for you to know is that you’re not alone.  The IRS estimates that businesses misclassify workers as 1099’s anywhere from 10-60% of the time.  The bad news is that if a misclassification is uncovered under audit, the outcome can be serious—back taxes, fines, and penalties in addition to costly law suits stemming from unprotected workplace accidents or injuries. 

Why is the misclassification issue such a hot topic right now?     

With state and federal government budgets fighting the pinch of reduced revenues, they have become increasingly aggressive about collecting monies they believe are owed to their agencies.  When we first started writing about the misclassification issue two years ago, we were only concerned about federal agency (D of L, or IRS) audits.  Today multiple state agencies have gotten involved because depending on how a worker is classified, this could impact who pays the workers compensation insurance, state unemployment and revenue taxes in the city of Seattle.  For example, access to mandated Seattle Sick and Safe benefits is targeted to put increasing pressure on employers to clarify who is entitled to this benefit and who is not, and to defend that claim in a lower court test.   

The federal government has set goals for the number of employers they will audit, and have set aside significant budget dollars to resource these audits.  Most alarming is that federal, state, and local governments have formal agreements to work together when cases of misclassification are uncovered—multiplying the financial ramifications that employers are likely to face under audit.    

What are some “red flags” that might trigger a misclassification audit—what should we avoid?  

Here are some simple rules of thumb:

• Overlapping a W2 and 1099 status for the same employee in the same report year can be an audit trigger.  Avoid firing a W2 worker and bringing them back a week later as a 1099.
• There is a form, IRS SS-8’s, which can be used to request government determination of a classification status.  Keep the number of these forms you file or your 1099’s file on your behalf to a minimum.
• 70% of misclassification audits get triggered by independent contractors filing for benefits routinely available to W2 workers, (i.e. workplace injury claims, unemployment claims).  Make sure your workplace policies and practices avoid references to these benefits.    

What happens if an independent contractor files for unemployment or is involved in a workplace accident?

One of the most common ways regulatory agencies become aware of misclassifications has come out of the increased number of unemployment and worker’s compensation claims that are being filed by workers formerly considered independent.  Unemployment officials have not only been granting 1099 workers benefits—implying they’re an  employee, not independent status—but have alerted other agencies as to the possible misclassification of other “similarly situated” workers, turning a claim for unemployment into a much larger misclassification audit.   

Another serious source of liability can occur if a workplace accident occurs involving a 1099 worker who is not covered under the employer’s Workers Compensation policies.  Lacking coverage, the employer is not protected from the limited liability provisions of workers compensation laws, and can find themselves sued for double, if not triple personal injury damages.

What can companies do to protect themselves from misclassification issues?

The best answer is the simplest—make sure your independent contractors are really independent contractors, working in ways that would normally apply to someone or a company who works independently—free of your control. 

If that level of independence isn’t possible, as it often isn’t, your choices are 1) to end your relationship with the 1099, or 2) convert the 1099 to your W2 workforce.  A third option, new to the misclassification issue, is to insert an Employer of Record Service provider who can turn your 1099 workforce into a low cost W2 workforce.  This option is discussed below.   

If your analysis reveals that there is room for a genuine independent contractor to work in your organization, you need to:

1. Develop and execute an independent contractor agreement that, among other things, acknowledges the intent of the relationship and waives any rights to company sponsored health or retirement benefits.  We recommend including in your agreement a provision that the independent contractor recognizes you as their common law employer with respect to protections under workers compensation laws in the event of workplace accidents.  We also recommend you include an indemnification clause that excuses you from any liabilities associated with an independent contractor’s failure to pay their own mandated self employment or W2 taxes.
2. Create specific policies and procedures for working with true independent contractors.  Train your front line managers on the requirements for “independence” to ensure the lines of differentiation stay clean. 
3. Review benefit plans to ensure a clear definition of plan participants, specifically excluding the employees of third party employers and independent contractors.
4. Conduct internal audits of your current 1099 workforce, ensuring all contracts are up to date, and that your company is paying the required taxes on those who are providing personal services.

What is an Employer of Record Service?  How can it help with misclassification issues? 

Because the issues surrounding employee classifications are not white/black and courts are inconsistent in their rulings on the cases they have heard, one of the ways to avoid any risk of a misclassification audit is to create policies that prohibit the use of personal service 1099’s in your organization, while offering an alternative method for providing quick and easy access to high impact talent.   

Employer of Record Services do that by converting a 1099 workforce into a W2 workforce at a fraction of the costs associated with most employers W2’s.  The Employer of Record Service provider simply handles paperwork, ensures worker compliance, arranges for weekly pay, and oversees the filing of all government required paperwork. 

As a benefit for the former 1099 worker, the Employer of Record Service provides full administrative and HR support, including a facilitation of their access to the benefit entitlements of W2 workers.  The bill rate or “take home pay” either goes up or remains the same, but their financial benefits are substantially increased.

Employer of Record Service providers typically will supply electronic paperwork to onboard or off-board workers quickly, preserving the benefits of immediacy and flexibility, while eliminating the risks of liabilities down the road.  The IRS is happy with this solution as are all local taxing agencies.  Your company is no longer on the target list for misclassification audits.    

The PACE Staffing Network now offers a full range of menu driven Employer of Record Services that can be used to turn a potentially dangerous 1099 workforce into a “legally compliant”  W2 workforce.  We handle all aspects of the “change process” by working closely with your team to explain the financial benefits to your 1099s for becoming W2s, oftentimes facilitating their own ability to move between assignments with different companies.     

For a discussion about how your company currently uses 1099 contractors and the options you have to mitigate the risk of misclassification, contact our Employer of Record Specialist, Kyle Fitzgerald at kylef@pacestaffing.com

While we have always known that the Patient Protection and Affordable Care Act (aka – PPACA, ACA, AHA, Obamacare) would impact the temporary staffing industry and its customers, the regulatory information that has been surfacing over the last several months is starting to reveal the impact of some of the details embedded in the law.

We are finding both good and bad news in the newly published  regulations….new requirements that will increase the costs of temporary and contract workers;  nuances in those requirements that will make flexible workforce strategies an even more attractive model for driving down operating costs.   While the law is still very confusing, the reality is that most of the regulations that will be written, have been written to the point where more and more cost conscious employers are starting to re-think how they get work done – what types of employees to put to work when, where,  and how.

The following information is being provided to PACE customers as a way to lay out the facts of the ACA and its regs, prepare you for what lies ahead, and offer some ideas for not only staying compliant, but mitigating some of the cost increases we are all anticipating.  Our comments  will focus primarily on the impact of the ACA on our client’s non-W2 workforce, which includes not only your temporary and contract workers but any workers performing work on your behalf through the services of a third party employer.

ACA Overview

Under the ACA, all “large” employers are required to do three things to stay in compliance with the law as of January 1^st, 2014.

1. Offer “minimum acceptable” healthcare insurance to 95% of their eligible fulltime employees (leaving a 5% margin of error).
2. Ensure that the cost of the plan they offer is “affordable” –i.e. will not require any employee to pay more than 9.5% of their annual pay towards the costs of an individual plan, and
3. Ensure that the plans(s) offered and the employer’s contribution to these plans is not set up to favorably treat highly compensated employees.

Large employers will be required to pay the costs for meeting these three requirements (what is often called the “play” option) or face substantial penalties for non-compliance (what is often called the “pay” option).

The definition of a “large” employer applies to any employer with fifty or more fulltime employees.  A fulltime employee is someone working 30 hours a week or 1560 hours per year.

The Bad News for Staffing Companies and Their Customers

Some clients have asked “does PACE have to be compliant with the law?” The answer is a resounding yes.  And for PACE, like most staffing providers, our bad news is that the types of healthcare benefit packages typically available to the staffing industry will no longer meet the new federal standards for “minimum essential coverage.”  Most staffing companies are making decisions now to either “play” (pay the additional costs associated with compliant coverage), or “pay” (pay the penalties for non-compliance, i.e. $2000/year per uncovered employee).

Both options mean that as of January 1^st, 2014, the direct costs associated with using third party staffing services will increase.  We are anticipating that the costs to become fully compliant with the law will require most staffing companies to ask for a 2-4% increase in client bill rates, just to break even;  anywhere from $.16 to $.35 cents per hour.

Cost increases for all types of staffing – core and non core - represent the bad news that is part of the ACA and will impact  all “large” employers on or about January 1, 2014.

Some Good News for Users of Staffing Services—the Variable Worker and Look Backs!

All of the news embedded in the ACA is not bad!  While an employer’s requirement to provide coverage applies to all full-time employees (individuals who work 30 hours a week, 1560 hours a year), there are special rules that apply specifically to the types of “variable” workers who work for temporary and contract staffing companies.  We believe these rules will create new opportunities for cost savings for PACE customers.

As the ACA regulations have rolled out, we now know an employer can stay in compliance with the law and still delay offering the mandated benefit packages to some employees who can be legitimately classified as a “variable” worker.  A variable worker is someone working in a job that is subject to change, or with an uncertain duration or end date – a condition that is pretty much a given in most temporary or contract staffing environments.  The period of time between when the variable worker starts work and the date when they are evaluated for benefit eligibility is called the “look back period” , and can be 3, 6, or 12 months—each employer gets to decide.

Staffing companies who go through the administrative process to confirm their workers are  “variable”  and therefore subject to the “look back” provisions in the law, will be able to generate significant cost savings for their customers.  While most of our client’s W2 employees will not qualify for variable worker status, and must, therefore, be offered the mandated benefits within an administrative period that cannot exceed three months,  most temporary or contract workers will be considered  ”variable” and  not eligible for insurance coverage until they have reached the required 1560 hours (9 months or more).

This variable worker “look back” provision in the ACA creates considerable opportunity for companies like PACE to offer our clients “variable” workers at significantly less cost than would be required for the client to hire an employee directly.  The differentials in the direct costs of these two types of employees will be dramatic—creating compelling reasons to rethink their use of third party employers in the early stages of a new hire.

The Impact of New Anti-Discriminatory Regulations on Our Clients Benefit Costs

One of the more significant impacts of the ACA, not often discussed, are provisions in the law that tighten up opportunities to treat different types of employees differently.  Consultants to our industry are advising us that the anti-discrimination components of the ACA will obsolete any plan that differentiates coverage or costs in favor of highly compensated employees.

For the staffing industry, this means that whatever benefit programs offered to our temporary employees needs to be offered to our regular employees.  For our customers this means that whatever healthcare benefit package offered to their highest paid employees must be offered to their lowest paid employees.

To be compliant with the “affordability provision” of the ACA, no benefit eligible employee in your workforce can be asked to pay more than 9.5% of their gross pay for the cost of your plan’s individual coverage.  For a worker earning 20K in a year, this means they cannot contribute more than $1900 a year or $158.33/ month  in order for the plan offered by their employer to be compliant.  How this compliance benchmark is achieved is what will get tricky for many employers.

When the compliance calculations are based on what the employer can legally pay for the lowest paid employees, it limits the amount of employer contribution that can be applied to the highest paid employees.  If the amount contributed to all employees is based on the amounts of the employer contribution made available to higher paid employees, overall costs of benefit coverage will skyrocket.

This is the dilemma the law intends.  Employers will be challenged to create benefit programs that will be equally appealing and affordable for all employees.  We are already talking to some employers who will elect to outsource their W2 relationships simply to avoid the risks of discrimination.

Employer of Record Services—Minimizing the Impact of the ACA!

The following are some ideas for PACE customers who are open to looking at new staffing strategies built around the special provisions in the law designed specifically for staffing providers.  You will notice that we have laid out these ideas from the perspective of a third party employer service provider, not just a temporary or contract labor provider.

The PACE Staffing Network has recently added a new “employer only” service, what we call an Employer of Record Service, partly in anticipation of the service needs of our clients following the implementation of the ACA in January.  Employer of Record Services are particularly attractive to employers with strong internal recruiting capabilities because they offer highly discounted bill rates that carve out all extra costs (for recruiting, screening, etc.) to include only those costs associated with providing W2 employer services.

Employer of Record Service packages are customized to the unique needs of each client, but the following represents a few ideas of how these services might be applied to your workplace as a way to shave workforce costs.

1. Employers can use a third party employer solution to avoid compliance requirements.  For employers who need to add staff, but also want to remain below the 50 FTE (fulltime equivalent) threshold that exempts them from the ACA regulations, using a third party employer solution to channel employees to another employer can delay the point when they must become compliant with the law.

The Employer of Record Service option is ideal for employers who have located an employee they want to hire, but don’t want to absorb the costs or administrative hassles of employing that worker directly.  Employer of Record Services is especially ideal for companies who want to either avoid or delay the compliance requirements of the ACA.

We are encouraging our smaller clients to plan now for what lies ahead.  We’ve heard stories of regulatory agencies getting ready to target companies who have been sending large numbers of already existing employees to a third party employer as a way to avoid ACA regulation.  We do not recommend this strategy. 

But for employers who haven’t yet reached that 50 FTE benchmark, a third party employer solution applied to your near term hires can successfully delay when your company falls under the ACA.

Word of caution: using a third party employer solution is considered a short term (one-two year) solution.  The administrative rules of the ACA dictate that after one year, all workers in your facility, regardless of who employs them, will be counted as part of your FTE.

2. Employers Can Use a Third Party Employer Solution to Mitigate the Costs of Adding Staff.  If you’re an employer who needs to hire but is reeling from the high costs currently associated with each new hire (and targeted to increase after January 2014),  it may be time to seriously consider using a third party employer solution as an extended (6-12 month) onboarding strategy.

While you may have already reviewed and walked away from the more traditional temp-to-hire staffing models, the lower cost, Employer of Record Service model offers all the cost savings advantages of categorizing employees as variable, while providing a very behind-the-scenes model of W2 employment.

Whether you use the full service temp-to-hire service model, or the considerably streamlined Employer of Record Service model, the opportunity to onboard a large number of workers at substantially lowered worker costs compared to the costs of hiring directly is the outcome of either choice.

3. Employers Can Use a Third Party Employer Solution to Avoid Administrative Hassles.  The ACA is not just a regulation that adds additional direct costs, but is a regulation rich in administrative detail and reporting requirements.  Administering healthcare benefits where you have to apply definitions of variable workers, calculate look back, measurement and stability periods, and do e “affordability” testing, is going to be a daunting task for whoever takes it on.

And the penalties for not doing the right administration correctly will be significant.

As a staffing company with a large “third party employer” workforce, one of our core competencies is our ability to manage all federal and state staffing regulations, including the ACA.  We are getting ready now to be fully compliant with all regulations by January 1^st, 2014 and will be ready to help our customers manage through the transition.

For a better understanding of how the ACA will impact your company and what you need to know about the options available for you to mitigate the costs associated with the new mandates, contact infodesk@pacestaffing.com to arrange for a personal consultation.  Our approach to the ACA is not only to be fully compliant by January 1^st, 2014, but to help our customers take full advantage of all aspects of ACA provisions that can drive down staffing costs.

This article was prepared by Jeanne Knutzen, Founder and CEO of the PACE Staffing Network using information from a variety of legal, staffing, and other professional sources.

While physicians, RNs, surgeons, and orderlies are darting around a busy hospital focused on caring for their patients, how do they know who’s responsible for what? Who takes care of the work schedules, management issues, orders, billing, financial matters and policy decisions that allow the hospital to function? Who handles the hiring, firing, budget allocations and business transactions that support the financial health of the clinic and the actual health of its patients?

This responsibility falls to the healthcare administrator, a hardworking, well respected member of the industry. This person directs everything that takes place within the clinic or healthcare facility, and she usually holds a master’s degree and several years of experience in a management setting. This position is perfect for those who would like to play a key role in healthcare but aren’t necessarily looking for hands-on treatment responsibilities in clinical environments. If healthcare administration sounds like an ideal career for you, enter the field by making the following moves.

Entering Healthcare Administration: Four Steps

1. Learn as much as you can about the field. For starters, it may be useful to know that this profession is in very high demand, and the number of available positions is expected to grow to about 100,000 by 2016. Inquire into your social network to find out who can connect you to an experienced healthcare administer (or administrators).  Once you have a list of names, set up informational interviews with these people to ask for guidance and advice.

2. Earn an undergraduate bachelor’s degree from a reputable, accredited university. Choose a major related to health policy, public health administration, business administration, biology, biochemistry, or any of the life sciences.

3. Pursue a graduate education. While some entry level healthcare admin fields don’t require more than a four year degree, most employers expect candidates to hold at least a master’s degree in public health administration or health policy. To gain access to a reputable graduate program, you’ll need to make sure your coursework, GRE scores, and recommendations are strong.

4. Survive graduate school without burning out. And while you’re working hard and gaining the support your need to pass your exams, make sure you’re also establishing a professional network. Earn the respect of your colleagues and professors, actively seek exposure to professional settings through part-time work and internships, and make contact with anyone in the field who may be able to help you when you’re ready to graduate and start looking for work.

When it’s time to step onto the job market, gather all the resources you need to hit the ground running. A professional staffing agency can be a great place to start. If you are looking for healthcare administrator jobs in Seattle, reach out to the employment experts at Pace for the connections, tools and job search tips you’ll need to get ahead.

Technical interviews are a common part of the job selection process within fields that demand programming skill. While no responsible hiring manager bases an entire hiring decision on technical questions alone, they nevertheless provide employers with a few key insights into a candidate’s readiness, insights that can’t be drawn from a resume, a cover letter, a work sample or a set of questions dealing with personality and behavior.

Technical interview questions may begin with a candidate being handed a marker and a whiteboard and asked to solve an algorithm problem. Candidates might be asked to write the binary search algorithm or write code that will rotate an array in place without requiring additional memory. Sometimes candidates will be asked to find the longest palindrome in a string, or solve troubleshooting problems.

The First Rule of Technical Interviews: Keep a Cool Head

The entire concept of a technical interview often upsets, intimidates, or makes candidates feel a little resentful. After all, most experienced code writers and programmers know that when these problems arise on the job, the answers can easily be looked up. Even the most talented and experienced employees don’t usually carry these solutions and algorithms around in their heads.

But when employers ask these questions, they aren’t just looking for straightforward answers. In fact, simply pulling the solution out by rote or from memory won’t really do anything to win them over. Instead, interviewers are presenting these questions in order to expose a candidate to a real world problem and observe the steps she takes to break the problem down and find a solution on her own. So the best way to prepare for this kind of interview won’t come from memorizing every possible answer to every coding problem imaginable. Instead, candidates should keep a cool head and call upon their experience, basic logical ability, and reasoning skills.

Prepare for your interview by practicing with a friend, preferably a friend with some relevant technical experience. And remember that even if your potential employers put you on the spot by presenting you with real-time coding problems, they’ll balance your response to these questions with the details of your entire profile.

If you looking for IT development positions in the Seattle area, contact the staffing experts at PACE today!

Non-standard working arrangements between employees and the companies that hire them are on the rise. At this point, data suggests that about 30 percent of employer-employee working arrangements in the U.S. fall outside the traditional 1099 model defined by details like eight hour days, onsite task completion, taxes directly withdrawn from paychecks, and employer-provided health insurance. And this number appears to be growing rapidly.

As you staff your open positions and search for the most efficient ways to pair workers with vital tasks, how can you decide between traditional employment contracts or consulting agreements with independent providers? Here’s a quick list of pros and cons that can help you move forward.

Salary Costs

You’ll usually need to pay your outside consultants more per job/hour/project than you would pay a full time employee. But there are several benefits you’ll receive in return for this increase. For example, consultants don’t need to be paid between jobs or kept on board during lulls in your business cycle. They typically show up, provide the skills sets needed, and then move along to the next job when company demand scales back. And they don’t require standard benefits like health insurance and retirement savings plans. In the long run, the amount you save on HR costs, benefits, hiring expenses and the stability that shelters an employee from market highs and lows will equal the extra amount you pay the consultant for his or her services.

Skill Sets

Consultants can usually offer a higher level of a specific required skill than you may find among your full-time employee pool. So they’re usually called upon to tackle work that’s time critical, skill specific, or too complex for companies to complete themselves. Because they make a living this way, consultants are wise to continually and aggressively build new skill sets, unlike employees who may be less motivated to personally investigate new corners of the industry. But at the same time, employees offer years of experience within their own areas, and they possess intangible institutional knowledge that consultants don’t have.

Tax Complications

Employers are responsible for deducting all applicable taxes from the paychecks of their traditional employees, which may include federal taxes, unemployment insurance, social security, and state and local taxes. This can add bureaucratic hassle to the full-time staffing process, while outside consultants don’t require this service, since they typically handle tax issues on their own. But again, the more labor and energy the consultant puts into a specific job, the higher the rate he or she can charge an independent employer. And employers will still need to collect W9 forms from consultants and report their earnings to the IRS.

This list of pros and cons is by no means comprehensive, but the choice between traditional vs. non-traditional hiring contracts can mean the difference between success and failure for companies with narrow margins. So don’t face these challenges alone.

Hiring a full-time or temporary employee can be beneficial to your business. Before you make your decision, reach out to the Seattle staffing and employment experts at PACE. We have the resources and network to help you manage your staff and draw in new talent.

While companies who have effectively used independent contractors to provide quick and easy access to specialized talent or consulting expertise are often considered amongst our most nimble, some of these same companies have recently found themselves facing hefty bills for back taxes, or complicated law suits stemming from workplace accidents or injuries involving a member of their 1099 workforce. 

Here’s the deal, if the IRS determines that a worker originally considered “independent” was actually an employee, companies can find themselves liable for unpaid Social Security, Medicare, and Unemployment taxes.  The IRS couldn’t be clearer, they see “employee misclassification” as a source of hidden revenue, and has budgeted several billion dollars to “identify and prosecute” employee misclassification issues.  

But unpaid taxes aren’t the only risk associated with the 1099 workforce.  Additional issues have developed around workplace accidents where, because a worker was classified as an independent contractor and not covered under the employer’s Workers Compensation policies, the employer was not protected from the limited liability provisions of Workers Compensation and found themselves sued for double and triple damages.  A nuance in Washington State law is that employers who use Independent Contractors are required to pay the Workers Compensation insurance and the state’s SUTA tax on hours and dollars paid to their 1099 workers.  Not all states have this provision, nor do all employers in the State of Washington abide by this little known component of our state law.  Bottom line, employers are at risk of incurring serious damage costs from a workplace injury by an “independent contractor.” 

One of the confusions we have seen employers make regarding their use of “independent contractors” stems from the mistaken notion that if the “contractor” is legal, meaning they have a business license or legitimate UBI (tax ID)  number, then they automatically pass the “test”, and can be considered “independent”.  The IRS, on the other hand, makes it clear that the “legality” of the claim of independent contractor status lies with the nature of the work to be performed and the degree of control the employer has over how and when it is performed.  

The IRS offers several tests an employer can use to determine a worker’s status:

• The degree of control over the worker’s behavior, which addresses the extent to which an employer controls the work performed.  The more control an employer has over how a worker performs the work—specifying where, when, and how the work is done—the less likely the worker will be considered “independent.”  Employers who place their independent contractors on work teams with required hours of work, mandatory attendance at meetings, required collaborations around work products, etc., often put an independent contractor at risk of being re-classified as an employee, subject to all the provisions and benefits available to an employee.   
• The degree of control over a worker’s financial opportunity, which relates to how a worker gets paid for the work performed or reimbursed for the costs they incur in performing the work.  The more control an employer has over a workers total source of income, the less likely that worker will be considered “independent.”  An agreement to pay a regular wage/salary for example, can be just as suspect as is an agreement to pay a worker hourly, but with an estimated work schedule of 40 hours each week.  Work agreements that tie a worker to an employer who then becomes their sole source of income, suggests a less than “independent” relationship with that employer.  A related financial consideration is how much personal investment the worker has in the tools they use.  Are they using their own tools/equipment or the company’s tools/equipment?
• The type of relationship that is formed between worker and company, oftentimes construed as the exclusivity of the relationship, or the duration of the work commitment.   Case law around the permanency of a relationship suggests that work assignments intended to last six months or longer better support the notion that a worker is an employee, compared to shorter term work arrangements.  A related factor is whether or not the worker is free to pursue other business opportunities during the term of their agreement to provide their personal services to a company.  If an employer is asking or assuming someone will work 40 hours/week on their behalf, it is hard to make the argument that they are free to pursue business opportunities elsewhere.   

Unfortunately, case law on the use of these IRS tests to determine employee or independent status is riddled with inconsistent outcomes, making it hard for businesses to make quick, definitive classification decisions.  An employer who wants to fully protect themselves can file IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.  The downside, it often takes several months to get a response on a particular request.

In light of the growing number of state or federally generated tax audits, we are seeing more and more companies who have historically relied on independent contractors for specialized work in the IT, engineering, or other professional services areas now looking differently at that staffing solution.  Some companies have elected to hire these workers directly; others have elected to end long term relationships with 1099 contractors, sometimes leaving significant expertise holes in their organizations.

A third option involves a new category of staffing service that allows an employer to continue to utilize their highly valued but flexible 1099 workforce, while avoiding the legal or financial risks being created by the revitalized audit efforts of state and federal agencies.  The PACE Staffing Network now offers a full range of  Employer of Record services that can quickly and cost-effectively convert a client’s current 1099 workforce into a “legally compliant”  W2 workforce without adding the additional costs normally attributed to a core workforce.      

The PACE Staffing Network regularly provides Employer of Record services to customers who are looking to optimize workforce flexibility, while avoiding the risk of unforeseen liabilities.  For a complimentary discussion about how your company currently uses 1099 contractors and the options you have to mitigate the risk of misclassification, contact infodesk@pacestaffing.com.

As you factor in the state of the financial job market, the unique needs of your company, and your available position, what kinds of traits should you consider valuable in a potential candidate? Which qualities should you consider red flags? When you see signs that seem promising, should you act fast and make a decision? Or should you consider the depth of your candidate pool and hold out for more? Keep these considerations in mind as you move through the selection process.

1. First, review the hiring successes and failures of the past. Gather a few profiles for careful examination, including those of the best candidates hired in the past five years and the worst (those who stayed for only a month, were difficult to get along with, or were dismissed after expensive mistakes). What made the great ones stand out? Why did the weak ones fail? And were there any signs of either success or failure that were visible before the candidates were brought on board?

2. Second, separate cultural considerations from technical knowledge and skill. A great candidate means a great “fit”, and fit includes a combination of both attitude and aptitude. Technically skilled candidates won’t thrive if they resist the culture, and likeable candidates will only prosper if they can master the job without excessive stress.

3. Choose candidates who will stay. This may mean letting go of the highly qualified or overqualified superstars, and turning instead to slightly less trained or less experienced applicants. These applicants can be hired at a premium, trained while on the job, and end up just as skilled and a little more grateful and loyal than their superstar counterparts. No matter who you hire, superstar or not, be sure to implement retention strategies to keep your valuable employees.

4. Choose candidates that are flexible and ethical. New regulations affect the financial industry on a regular basis. Are your candidates ready to let go of old models and embrace new ones quickly and fluidly? Are they interested in doing what’s right and going the extra mile to stay aboveboard? Or are they entrenched, entitled, sullen about change, and reluctant to break old habits and patterns?

5. Choose candidates who show respect—Not just for the company, but also for its business model, its customers, its clients, its stakeholders, and the larger community. Look for candidates who consider the big picture and are interested in how the entire company works, including revenue generation.

Reach out the Seattle staffing experts at Pace for more information on screening, hiring and retaining only the most talented financial employees.

As part of our watch on the governments crack down on employee misclassifications and the impact on the 1099 workforce, we thought our readers might be interested in the latest efforts of the Department of Labor to expand its attack on all forms of employee misclassifications that impact a workers access to taxable levels of pay and benefits. 

The DOL’s Wage and Hour Division has proposed to conduct a survey to collect information from employees on 1) whether they are classified as an employee, independent contractor, or some other status, and 2) whether or not they understand the implications of their classification status on access to certain pay or benefits.  

The survey is being tagged as a first step in the larger “Right to Know” initiative, which they consider a way to “foster more openness and transparency in demonstrating an employer’s compliance” with  certain recordkeeping requirements associated with the Fair Labor Standards Act. 

When fully implemented, “Right to Know” regulations would require HR professionals to disclose to their workers how they determined their classification and how their pay and access to benefits will be calculated.    

The Society for Human Resource Management (SHRM) has been asked to comment on the survey proposal and will question the necessity for the survey, its format, and its use. 

For more information on the DOL Misclassification Initiative you can visit their official website at www.dol.gov/whd/workers/misclassification.

For information about the impact of a 1099 misclassifications and how to avoid the hidden liabilities of misclassifications in general, contact our infodesk@pacestaffing.com.

2012 and 2013 are big years for Intuit Health software, since the company is now rolling out two new mobile apps that are expected to have an impact on healthcare management and administration.

The first, called Mobile Inbox, will allow patients to access their doctors and health information from their mobile devices. The system will be able to handle a wide range of administrative tasks, like making appointments, paying co-pays, and reviewing lab results. The second, called the iPad Patient Check-In, will replace the patient sign-in sheet and clipboard with an iPad accessible app that will accept scans from driver’s licenses. Patients will be able to scan their licenses through a reader and the information blocks on the screen will populate automatically.

These are only two of the new apps coming out this year that may change the way health care managers tackle tasks related to record keeping, patient care, and customer service.

How Will Mobile Apps Impact Staffing?

Apps like the iPad patient check in and mobile inbox will make patient access to information a little easier, but what impact will these developments have on healthcare managers? Specifically, how will these and other mobile utilities affect staffing?

Those who have been in the industry for more than a decade may remember the initial challenges of electronic record keeping systems. When these systems were first introduced, newer, younger and less experienced staff members often adapted quickly, while older and more established practitioners sometimes distrusted the new systems and were slower to make the transition. As in almost every industry, those who are slower to adopt new technologies are often the most valued and experienced employees, which can place healthcare managers in a challenging position.

But in most facilities, the challenges of ERM system adoption are now in the past. And the lessons learned from these adoptions remain with us. First and foremost, healthcare staffing managers have learned to value flexibility and tech-savvy as an appealing trait in new hires. And second, the format and delivery of countless training programs have been shaped around exactly these types of challenges.

To make sure you’re hiring top candidates, and to make sure you’re properly training existing employees as you implement new systems, reach out for guidance. The experienced Seattle staffing experts at Pace are standing by to help you and your teams make the most of new technologies and opportunities.

March was another big month for the temporary help industry.  Staffing firms added between 20k-50k new jobs between the end of February and end of March.  Year-to-year, the number of temporary jobs grew by 6-7% when compared to temporary jobs in March 2012.

The growth in temporary jobs is explainable in the context of the broader market where the economy added 88,000 jobs in March.  This is the lowest rate of job growth in nine months and far below the 200,000 or more jobs predicted by many economists.  This is just another example where growth in temporary jobs often goes hand-in-hand with a slowing down or increased volatility in the larger job market.

Overall employment growth was primarily driven by new jobs in professional and business services (+51,000), health care (+23,000), construction (+18,000), and leisure and hospitality (+17,000).  

The overall U.S. unemployment rate took a small dip downward from 7.7% in February to 7.6% in March.

Other negative news came from tracking layoffs where March reported companies announcing over 49,000 in layoffs.  While this represents an 11% downtick of announced layoffs from February, it is a 30% increase over layoffs reported in March 2012.  The first quarter of 2013 saw more announced layoffs than any quarter since 2011.

A recent survey by PNC Financial Services Group indicates that the owners of small and midsized businesses planned to delay hiring new employees despite what is otherwise their cautious optimism about the economy in general.  Three out of four small and midsized businesses expect their staffing to remain unchanged for the next six months.

It would appear that the optimism with which most businesses started this year is now being tempered by ongoing reports of actual results falling short of expectations.      

For more information about the local job market and the availability of employees for temporary or direct-hire, contact infodesk@pacestaffing.com