Salaries

For all you business owners out there, after growing to a point where you needed to take on more people, did you always pay them regular salaries from day one or did you hire them on as, say, subcontractors, to be paid per project?

XL
Friday, May 14, 2004

In the U.S., employment law is such that you don't get to decide if someone is an employee or a subcontractor based on how you pay them. If they show up everyday, use your tools/equipment/what-have-you, and are directed by you solely, they are employees. If a state DOL finds out, you'll be paying back unemployment insurance, FICA matching, etc...

That being said, it generally makes more sense to use subcontractors early on because of the felixibility and simplicity. Be careful.

Mark L. Smith
Friday, May 14, 2004

The comment about what makes an employee vs a contractor is valid in Canada as well.

See http://www.ccra-adrc.gc.ca/tax/individuals/resourcekit2003/fs-employee-e.html

That said, you can certainly structure your working relationship in such a way to ensure subcontractors are really subcontractors and not employees, even if you let them use your equipment (that is only one of a number of differentiating criteria).

In our case, we started out by hiring subcontractors for specific deliverables.  At some point, the annoying paperwork related to setting up / managing contracts outweighs the annoyance (and extra cost) of source deductions.

Employees are also a status symbol ;)

Phibian
Friday, May 14, 2004

It is the same here in the UK apparently, with something called IR35, although it is easily avoided if you're running a real business and not just cube-fodder for an agency.

Steve Jones (UK)
Saturday, May 15, 2004

  Recent Topics

  Fog Creek Home