2013 / 04

Full Time Employees or Outside Consultants? The Benefits and Drawbacks of Each

by Jeanne Knutzen | April 30, 2013

0 Staffing News Full Time Employees Or Outside Consultants, Seattle Staffing, Seattle Staffing Agencies, Seattle Staffing Agency, Seattle WA Staffing, staffing agencies in seattle, Staffing And Hiring Decisions, Temporary Staffing In Seattle, The Benefits Of Outside Consultants

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fall outside the traditional 1099 model defined by details like eight hour days, onsite task completion, taxes directly withdrawn from paychecks, and employer-provided health insurance.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.

Your 1099 Workforce – Avoiding the High Costs of Misclassifications

by Jeanne Knutzen | April 24, 2013

0 Human Resources Staffing, Staffing News 1099, 1099 workforce, Independent Contractors, PACE Staffing Network, Seattle Staffing, Seattle Staffing Agency, Seattle Temporary Staffing, Temporary Staffing, Workers Compensation

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.

What Financial Managers Should Look For In a New Hire

by Jeanne Knutzen | April 19, 2013

0 Finance/Accounting Staffing, Human Resources Staffing financial staffing seattle, financial staffing services seattle, Hire Talented Financial Employees, Hiring Financial Employees, Jobs In Seattle WA, Screening Financial Employees, Seattle Staffing, Seattle WA Financial Jobs, Staffing In Seattle WA, Temporary Staffing Seattle, What Financial Managers Should Look For

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.

More on Employee/1099 Misclassifications – The New “Right to Know” Proposal

by Jeanne Knutzen | April 16, 2013

0 Staffing News 1099, 1099 Misclassification, Department of Labor, HR Professionals, PACE Staffing Network, Seattle Staffing, Seattle Staffing Agency, Staffing Agency, The Society for Human Resource Management

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.   CommunicationThe 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.

The Job Market – March 2013

by Jeanne Knutzen | April 10, 2013

0 Staffing News Job Growth, Job Market, PACE Staffing Network, Seattle Staffing, Seattle Staffing Agency, Staffing Firms, Temporary Jobs, Unemployment, Unemployment Rate

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