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I’ve worked one and off as a lead carpenter for GC’s, and on my own doing more cabinetry and finish carpentry. This summer I have lined up several decks and porches, a small kitchen, maybe a turret/lantern. In short, work where I could use relatively unskilled help a good part of the time. So I hired a friend (age 30) who has little experience but the right personality and attitude to be good. He’ll start in two weeks. Questions for you guys–
Sub or employee? He’s been self-employeed in another field, is comfortable with the responsibility, and I don’t know if I’ll need him after the summer. Is it ok to hire him as subcontractor?
How much time to budget for time not with employee? In other words, he wants to work a lot of hours, but he’ll need pretty constant supervision and I’ll need time to do bills, meet with owners, do material runs, paperwork…How much time does it take to do all this?
The touchy-feely one: How do you maintain the crew’s interest? When I’ve managed others I’ve been frustrated because I didn’t feel they were putting in enough effort. My friend wants to learn fast (competetive personality) and work a lot. Is it effective to push employees a little, physically and mentally, do you give them goals to work for? How do you keep morale up? I know it’s subjective but any advice would be welcome.
Mike
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Mike
In a situation like this if the IRS ever questioned it there is ABSOLUTELY NO QUESTION that this person is an employee.
Iknow manytime this is "streched" in construction, but it seems to me that this is well past the breaking point.
One of the test for indepentent contractor is that they are "indpendent" in terms of settign work times, proceedures, and supervision.
*Thanks Bill, when I've worked for GC's it's been as a sub, but I was independent--I forgot about the supervision thing. Guess I'll have to get the paperwork out...
*MarkI WISH that everyone was an indepentent contract, ie no withholding. Withholding was started during WWII for the "convience" of the worker and so that they government could get the money earlier. That would quickly lead to tax reform, but that is for the Tavern.Anyway you will need a Federal Tax ID number and a state one. The IRS has circular E (I think, it has been a while). And you might have to get workers comp (the states sets the level) and also pay unemployement taxes.Contact your local SBA and they should have the contacts need to get you into the right departments.Now you know why so many people are treated as IC even if they are really employees.
*Mike,Like the man sez.......employee. No doubt about it.I found the IRS to be very helpful when I started my business with helping me set up the right paperwork for employees. Believe it or not.As far as morale? Just be a friend as well as a boss. It all starts with respecting each other.Good luck,Ed.
*Mike- Definitely an employee. You can get seriously burned if your "sub" gets hurt on the job or is remiss in paying his taxes. As far as morale is concerned, there are a lot of different ways to motivate employees and you will have to find out what is best for you. The golden rule is always a pretty good place to start. Keep in mind that little differences can really start to grate with the passing of time. We are lucky to have enough employees that we can rotate our personel to give everybody a fresh set of coworkers every six to nine months. You (and your employee) will just have to practice mutual forbearance. Good luck.
*Uh OH Mike!You hired your friend..Oh well..time to test the friendship! You'll be fine if you both know its business.That would be employee. CYA.Employees are a large cost of doing business. They must be productive. Always stay ahead of them and give them more than they can do in a day. Establish the rules; start and quit times and breaks. Safety.Work smart, help one another, enjoy the job earn the money. Put fires out quick and always remember, "If you don't use your head you'll use your feet."Good luck, Dan-O
*mike, i've always had employees.. but it took me about 15 years to learn lesson #1....get a payroll service.. i use Advantage (hqtrs. in Maine )....i spend about 60 seconds a week on payroll for 5 employees..before that it was always a struggle... the qrtly's were always late.. the withholding was late.. penalties.. etc...the second lesson took 24 years.. i finally incorporated and covered myself as an employee... now i own the company i work for.. and i get paid on time.. and i'm covered by WC.. and State Unemployment...both of those were big steps to running a business instead of a hobby..but different strokes..and..b hey, whadda i no ?
*Thanks a lot guys. I'm gonna print this out and use it a guide. Another question, though: Say I was hiring another fully competant/independant carpenter to help me on one job, that led to another two jobs, then we were done with each other for a while. Is that different than my situation because I'll have to tell my help what to do?Thanks,Mike
*Yes and no. That's different because of how the other guy gets his income. If he worked with you ...even as a sub...on every project for a year....the irs will consider him an employee......if your work only makes up a portion of his yearly income....then he's not an employee. If you consider a situation like that...which I'd consider ideal....think about a limited partnership....based on a job by job basis. I got that idea from a few people here, but haven't met the right other partner yet. Good luck, hopefully others with more specific advice on limited partnerships will chime in. Jeff
*Mike, what you propose is not unusual. Many people do just that. You might also consider finding someone else like your self, and someone who also values courtesy, good clean working habits and personable with customers, and act as a sub for each other as the need arises. That way each of you can take on bigger jobs and make an extra 20% or so on each other when one acts as the GC and the other acts as the sub. It's a nice arrangement.The other option with someone like that to do as Jeff suggested and split the net profits on larger jobs you work on together - like a limited partnership. In fact, regardless of who get the original sales call, yo two can even work up the price together. That way, the price is agreed upon mutually, and eliiminates forgetting something or under estimating. These type of "alliances" are done routinely in other industries and between Independent Professionals (IP) such as consultants. To get more background on that go to http://www.1099.com, a web site for IPs, and peruse their site. To the degree you've suggested and Fred and I posted, our industry is really archaic in the business operation aspects.
*I agree with the payroll service. I use ADP (they paid one out of seven people in the US last year). They are a bit expencive but I think it's work it. Call them and ask the questions (www.adp.com - I think).
*".if your work only makes up a portion of his yearly income....then he's not an employee."Mike, that is not true. You can still be part time, part year and still be an employee. There is a 10-15 step question to help define which is which. But control and supervision is the one of the main points.http://www.irs.gov/smallbiz/construction/education_contractor.htmA general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor and not the means and methods of accomplishing the result.A general rule is that anyone who performs services for you is your employee if you can control what will be done and how it will be done.
*David, I used a payroll service and they only charged me 3% of total payroll - cheap considering just the paperwork alone. I had only one full time employee. Better deals on workers comp and medical also.
*I think the most important thing you can do is to document, document, document. It's been said here that the IRS will consider this situation or that. You know what......? The IRS will do whatever the scoots the puck in their goal.If you have a number of relationships with independent tradesmen as outlined in post #8, Have the following: A 1099 for each guy. A contract signed by each guy for each job, A certificate of insurance for each guy, for each job, and invoices describing the work, never the hours. For each job.Remember, you have to defend yourself. Not only from the IRS, but lawsuits arising from injuries, workmanship and general liability.Oh, also, go see your insurance man and your lawyer.Don't rely on us nailbangers for all your final business advice. The point is to do what you love w/o fear. Luck
*Mark McDonnell,It sounds to me as if you are trying to dodge the law. Yea, what you suggest will help you not get caught as easily, but if you are caught, you're still getting into trouble.Billy
*Billy,I don't think you will get an employee to buy liabilty insurance or behave "like" a legit company. There are a lot of one man opperations out there who are legit. Master Electricians & Plumbers, Master Finishers, Stairbuilders, HVAC, Carpenters who only do interior finish, Carpenters who only do kitchen installations, Cabinetmakers and so on. I am not suggesting a contractor skirt or dodge the law. If you have an employee, as outlined in the earlier threads, (well done!) treat him like one or you will get nailed. I'm suggesting that a contractor, who subs an one man company, get all the documentation to prove you have just hired a company to do one job. And to follow that procedure for each job that you do. Your point is well taken Billy, I've seen many a good man go down because he failed to answer that question. This is a business killer.Luck
*It seems as though I may have read your post wrong. It seemed as though you were saying to take the steps to avoid an actual employee being called one. If I read it wrong, I'm sorry. If I didn't I'm not. But from your last reponse, it looks as though I need to go back and read. These two posts look contrary to each other. Again, thanks for replying. A reply always helps to clear the air.Billy
*Hey Billy,Thanks. I should be more clear.I was responding to Mike's post #8. Your right about getting specific on these kinds of issues. Thanks again for your points and your input, always enjoy it.Luck
*I was under the impression it was based on the time worked, not control.......I'll check the link, thanks for the clarification. I thought it was time based, because I once was offered a stiuation to sub for a contractor, doing his smaller one man jobs, he'd schedule them, but I was to do everything from layout to punchlist....with no control from him.....but he was told that if I did that for most of a year, and into the next....that I'd be considered his employee. Jeff
*Mike, I'm as much as an anti tax guy that you'll ever find, but you'd not be able to convince me that your rookie with no experience is a self employed contractor in a skill business. Your other guy, is self employed. If you team up occasionally, he still is self employed. There are other tests however, so familiarize yourself with them. MIke's suggestion for a payroll service is well founded. I hated the hassle of payroll before I signed on with Paychex. We only payed a very small amount for one or two checks each week. The total sum was no where near the 3% that Sonny payed. We are now doing it (payroll) ourselves with Quick Books. I prefer the Quick Books because it forces us to keep up to date books since each check is written from within the program. Luckily I have a wife that is interested in learning about computer programs and keeping books. Without her, I'd probably still have Paychex.Keep in mind that your friend mighht not be as interested in your business as he seems. I've seen a lot of enthusiastic newbies lose their interest fast. Have a back up plan ready, maybe some temps that AJ uses...blue
*Thanks a lot guys. Off to visit the insurance guy and find a lawyer.Mike
*Hey Mike, is yours an "S" or "C" corp? I'm looking into incorporating my business and am leaning toward "S". Any thoughts? What sort of legal fees should I anticipate? Thanks, bearmon
*I assume you mean the other (incorporated) Mike, but just to let you know there was a discussion about this in the last few months, so you might want to try a search....Mike
*mine is an "S" ... for my contracting business...fairly simple...pass thru profits to my 1040also have a"C" for a real estate investment company..retained earnings and tax loss carry forwards....then there are the new LLC's.. but don't ask me...lots of pros & cons...our "S" corp stayed on a cash-basis... which also has it's pro's & cons.. but we could select "cash".. so here we are..the archives had one about "which one are you."...if you find it...post a link.
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I've worked one and off as a lead carpenter for GC's, and on my own doing more cabinetry and finish carpentry. This summer I have lined up several decks and porches, a small kitchen, maybe a turret/lantern. In short, work where I could use relatively unskilled help a good part of the time. So I hired a friend (age 30) who has little experience but the right personality and attitude to be good. He'll start in two weeks. Questions for you guys--
Sub or employee? He's been self-employeed in another field, is comfortable with the responsibility, and I don't know if I'll need him after the summer. Is it ok to hire him as subcontractor?
How much time to budget for time not with employee? In other words, he wants to work a lot of hours, but he'll need pretty constant supervision and I'll need time to do bills, meet with owners, do material runs, paperwork...How much time does it take to do all this?
The touchy-feely one: How do you maintain the crew's interest? When I've managed others I've been frustrated because I didn't feel they were putting in enough effort. My friend wants to learn fast (competetive personality) and work a lot. Is it effective to push employees a little, physically and mentally, do you give them goals to work for? How do you keep morale up? I know it's subjective but any advice would be welcome.
Mike