Hiring 101: Employees, 1099 Contractors & Job Descriptions

Author : Camputaro & Associates
Sep 17, 2018

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Many companies have embraced a fluid workforce to keep up with the competition. Instead of hiring an entire staff of full-time employees, your business may utilize a mix employees, contractors, and seasonal staff to get the work done. It’s important to understand the difference between an employee and a 1099 contractor for tax purposes. Additionally, you should consider taking a closer look at your job descriptions and employee manuals and keep them up to date once you have them.

Employee vs. Contractor

At first glance, employees and contractors may fulfill the same roles. They may even be doing the same job together at your company. However, there are significant differences between the two, and the job title is only a small part of that.

Employees generally work for one company under the control and direction of the employer. While an employee can work from home, the company usually sets the hours and determines the scope of work as well as how the work is performed. In return, an employee often receives benefits, such as health insurance and paid time off for vacation or sick time.

In contrast, independent contractors are self-employed. They often work for different companies and set their own hours. Their pay is determined according to the terms of the contract they have with your organization. Independent contractors accomplish their tasks as they see fit, using their own tools and resources to get the job done. They may bill for materials and tools as agreed in the contract.

For your business, the tax implications are important. For an employee, the employer is responsible for submitting employment taxes to the IRS, such as Social Security and Medicare taxes. It’s vital to ensure these get submitted timely and accurately.

On the other hand, independent contractors must make their own estimated tax payments which your company isn’t responsible for. However, your business is required to issue a 1099 at the end of the year to independent contractors who have been paid more than $600. The IRS also receives a copy of that form 1099. Our accountants can help you with the tax implications of your workforce by handling your payroll and end-of-year reporting requirements.

The Importance of Job Descriptions

It doesn’t matter if you have employees, independent contractors, or seasonal workers as long as you have job descriptions for every position. Writing a job description is obviously useful when you’re hiring a new employee, but it also makes sense for understanding and optimizing how your company runs.

Your job descriptions should include the roles and responsibilities of your employees as well as their organizational goals and importance. If you don’t have any job descriptions at the moment, you can utilize your staff to prepare them. Ask each employee to list their job duties by tracking their hours for at least a week. Then have supervisors and managers add to the list as they see fit. This may take some time as your employees will have to do this in addition to getting their work done, but the end result may surprise you in more ways than one. For example, some of your employees may have a bigger workload while others are constantly looking for projects to take on. Your job descriptions can help you even out those responsibilities.

Once you understand how every employee or contractor contributes to the company’s success, you can optimize the workload in other ways, too. For example, you can cross-train your employees to ensure the jobs get done when one of them is sick. Teaching your employees how to perform their co-workers’ jobs can also prevent fraud. Rotating job duties is especially important when you’re dealing with sensitive financials.

Why Employee Handbooks Matter

Not every small business has an employee manual or handbook. But it may not be a bad idea to consider creating one. Having a handbook can protect you legally, because it provides clear guidance on handling certain situations and issues. An employee handbook can contain information on all areas of your company, including but not limited to performance reviews, compensation, dress code, benefits, safety, and drug and alcohol policies.

Whether you’re evaluating your employees, hiring additional staff, or receiving bids from independent contractors, it’s important to understand how your work relationship affects your organization. It’s important to classify your employees correctly. If you’re not sure whether you’re dealing with an employee or independent contractor, we can help you make the distinction.

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Camputaro and Associates
Certified Public Accounting Firm
136 N. Orchard Street, Suite 8
Ormond Beach, FL 32174
(386) 255-2511