Employee or Sub-Contractor

Plumbers have you considered making your employees 1099 sub-contractors? Some have toyed with that idea to save a lot of money. Just think; no payroll withholding, no FICA, no unemployment, no workers comp, and no benefits. That would yield a very nice savings. So, rather than deliver excellent service and raise your prices, you want to cut your way to profitability, right?

It all sounds good, but it will bite you so hard that you need to keep reading.

To protect your business, all these subs now have to provide their own Workers Comp Insurance with you as an additional insured. In the plumbing business, most states and municipalities require that you post your license for the business and these subs can no longer work under that license, which means, they too must be licensed. If they are independent contractors, they can also work for themselves and other companies. So whose customers are they serving? Plus, you really can’t set their schedule, or tell them what days to work or take off, or tell them what to do. It is starting to sound not as appealing, right?

Then someone gets the smart idea that they can create a hybrid. The tech is an employee, meaning you schedule them, tell them what to do and work under your license. But the technicians have to pay for their uniforms, pay for their phone or other communication equipment, pay for the materials they use on the job, or have a dollar limit on the materials they can use. Some companies even attempt to back the materials out the job when the technician’s truck has to carry this material and they are responsible for it. The technician never knows what his paycheck is going to be. This is wrong for all kinds of reasons, but it does happen. And of course the Department of Labor loves you kind of employers.

Raise you prices and provide excellent service. Pay your people well, either hourly with a bonus structure for exceptional sales revenue or by commission on the total ticket. If you cannot explain a service tech’s pay system in 10 seconds or less, it is too complicated. You just need to calculate your break point to keep your payroll costs in line. If you need help with that, let me know. This is what I do all day, every day.

The Plumbers Coach™ Detailed personalized business coaching and training for plumbing contractors. Like us on Facebook @ThePlumbersCoach, follow us on Twitter @T_PlumbersCoach and LinkedIn @KeithGlass1.

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