Know Your ABCs

Know Your ABCs

Before hiring independent contractors, consult first with a lawyer who's well-versed in the rules everywhere for federal and state-worker classification laws because they vary widely.

There are some states where independent contractor relationships are subject to the "ABC test" where you show that:

a.) the contractor's work is not under your company's direction and control

b.) it is outside the course of your company's usual business

c.) the contractor has an independent business to do that work

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What to Know Before Hiring Independent Contractors

inc.com

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Hiring independent contractors instead of employees can save you 15 to 30 percent on payroll taxes and benefits, however if you are caught misclassifying whatever you have saved will be obliterated from what you'll owe in back taxes, benefits payments fines, and federal penalties.

Mitigate the risk by tailoring your policies to the one with the strictes laws. 

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It's time to consider reclassification if a contractor works for you full time with no other clients and you're exercising control over that contractor's work. 

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Do:

  • Frame the negotiations as a problem-solving challenge.
  • Take the time to make small talk. It’ll build connections you can leverage later on.
  • Stress the areas on which you agree, and use words like “we” to signal you are invested in the relationship.

Don’t:

  • Reflexively cave on issues because you think it’ll win you favor. 
  • Simply ask what the other side wants. Ask why they want it.
  • Mistake impact for intent. The other side may have their own unique pressures that restrict their ability to maneuver.

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