WorldWide Drilling Resource

Hiring independent con- tractors offers employers many advantages. Employ- ers do not pay taxes on inde- pendent contractors’ wages, and are not expected to provide benefits. Employers often save 30-40% on labor costs by using independent contractors. Since independent contractors are generally hired for a specific period or project, employers have no obligation to rehire them after each contract period or project is complete. However, there are certain risks and “gotcha moments” to be aware of when you hire independent contractors! Who is an independent contractor? As a general rule, the more an employer controls the work of an in- dividual, the more likely they are an employee. Generally, employers can control or direct the result of the work done by independent contractors, but not the means and methods they choose to accomplish each assignment. Additionally, employers do not supervise a contractor’s work as they do an employee’s, nor do they typically provide the supplies or tools for a contractor. Nevertheless, there are exceptions to the general rule, but suffice it to say employees have a different, more closely controlled relationship with their employer. Advantages of hiring independent contractors - Companies can get the same, or better, services for less money because there are no employment add-on costs. Independent contractors provide their own equipment, materials, and office space. Employers are not automatically responsible for injuries independent contractors may sustain while providing services, or for wrongful termination, job discrimination, or sexual harassment lawsuits. Disadvantages (gotcha moments) of hiring independent contractors - Misclassifying employees as independent contractors is a po- tentially serious liability. On one hand, it can expose employers to federal sanctions and investigations; state audits and penalties; as well as unexpected unemployment and workers’ compensation (comp) lawsuits, not to mention the IRS (Internal Revenue Service), and serious penalties for failing to file forms 1096 and 1099. Perhaps the biggest unseen risk of independent contractors is related to insurance and workers’ comp. The best-case scenario is, misclassifying an independent contractor on your insurance results in an insurance audit where a premium is due. This can potentially amount to tens-of-thousands of dollars depending on the misclassification in your policy. The worst-case scenario is one where there is a bad day, no insurance coverage, and you, the employer, are on the hook for the independent contractor’s injuries as a statutory employee. Statutory employees are workers who, by statute, must be considered employees, even when their work relationship with an employer looks like that of an independent contractor. Various entities each have their own test for this, but remember Uncle Sam, workers’ comp, and insurance are all different. As an employer, remember to be alert, be cautious, and be aware when you hire independent contractors. Good luck! Kyle Kyle Rehme may be contacted via e-mail to michele@worldwidedrillingresource.com Kyle Rehme uses his personal knowledge of the water well, drilling, and environmental in- dustries to provide cus- tomers with practical insurance solutions. Employee or Independent Contractor? by Kyle Rehme VolkBell Property & Casualty Insurance, LLC , . *#! ' , , . &#," 1 0% "& 1 * ', &#," (%$ %% *() *,0 +- %,0 '+-* ' *#%% *+ 1 '- ,-* *+ 1 -))%# *+ 1'!#' *+ 1 ('+-%, ',+ 1 , * %% 1 ,"( # 1'.#*('& ', % 1 (," *& % 1 (' - ,(* (% *#%% *+ 1 #% # % *.# + 1 , * -&) *.# ) #* (',* ,(*+ /,(' * (*, (%%#'+ 36 JULY 2016 WorldWide Drilling Resource ®