Freelancer Management

Hiring independent contractors has many benefits. Companies appreciate the ability to engage only when needed and end engagement whenever it makes sense, outsourcing tasks not related to your core business, have less onboarding hassle, and not having to pay for benefits. It makes sense why engaging independent contractors is often to a company’s advantage, but only when it’s done in accordance with IRS guidelines. Here’s what you need to know to stay out of trouble. 

Let’s Start at the Very Beginning

The very best place to start whenever you’re engaging a worker is to classify correctly from the outset. Whether a worker is classified as an employee or an independent contractor guides what benefits they’re entitled to by law. Legal disputes over worker classification have plagued everyone from Uber to FedEx. Following the rules and classifying correctly from the beginning saves time and the potential for legal troubles. 

Be Ready to Adapt

From workers to legislators, people are thinking about how to manage the evolving employment landscape. Some envision an entirely new system with changing guidelines that suit changing times. Such a system might include “portable benefits” that travel with workers from company to company. 

We can only guess how things will change, but we do expect them to change. Businesses that stay in tune with these kinds of conversations and legal considerations are in position to adapt as those changes come. When that’s not something a company can accommodate, engaging a third party to handle those details makes sense. 

Protect Yourself

There are some basic ways to protect yourself should the IRS ever come knocking. It’s always good business to create a contract with an independent contractor. This is beneficial for the business as well as for the worker as it makes sure everyone knows the expectations. From there, you must keep track of your payments to independent contractors and report them. Finally, while it’s usually unnecessary to withhold income taxes, you may receive a backup withholding notice from the IRS. In that case, you must withhold income taxes as indicated by the notice.

The Bottom Line

The world of independent contractors offers benefits to workers and companies alike. While those benefits do include flexibility for workers and lower costs to employers, they don’t cover things we’ve grown used to such as built-in 401K plans, health insurance options, and worker’s compensation. For many independent contractors, that’s a problem.

Currently, there is no roadmap telling you how to pay contractors fairly while keeping costs down. The good news is that we at PayReel have been on this road long enough to navigate it legally and ethically. If you can’t (or just don’t want to) keep up with the rules and developments, PayReel can keep up for you. Check out this handy guide to see if you might benefit from having a third party handle these details for you. Our team manages worker classification, payroll, and payroll taxes. In addition, as the employer of record, we even take on all risks associated with a variable workforce.

Going above and beyond in the ethics department isn’t just a warm and fuzzy notion. It’s a sound business decision, too. 

Clients tell us they grapple with worker classification over and over. They wonder whether workers should be treated as W-2 employees or as 1099 independent contractors. It can be a complicated subject and every time the game changes, the rules change, too. Fortunately, with brand ambassadors, it can quickly become simple. The answer comes down to the way you answer one question. 

How Does The IRS Distinguish Between an Independent Contractor And an Employee?

One of the most foundational questions the IRS considers is how much control the employer has over a worker’s schedule, payment, and other aspects of their job. The greater control the employer has, the more likely the worker will be considered an employee. For example, workers will be considered employees when most of the following statements apply: 

*Clients set expectations for work hours
*Workers perform services and expectations in a certain order (as directed by the client)
*Workers submit reports
*Workers perform their duties onsite at a specific location and for a set event
*Workers are paid hourly rather than on a project basis

Independent contractors, on the other hand, are autonomous workers and are not required to set a schedule (i.e.: show up at a specific time for a specific event) or perform tasks in a certain order. They are also often paid on a project basis rather than hourly. 

Where do Brand Ambassadors Land And Why Do Companies Care?

The above description for an employee usually applies to brand ambassadors. Their work simply does not look like the complete autonomy the IRS requires to consider a worker a true 1099 independent contractor.

If the answer really is this simple, why do companies want to justify a different decision? One of the most consistent arguments for attempting to classify any worker as a 1099, regardless how thin the justification, is that it’s cheaper. And it is! At least up front. But if there’s one thing we’ve learned, it’s that the IRS is paying attention. Should you ever get caught misclassifying a worker, you’ll find out it’s not so cheap after all. Aside from the money you risk sinking into paying criminal and civil penalties, you also risk losing credibility along with energy and valuable human resources spent dealing with the issue.

It’s stressful. It’s costly. It’s just not worth it.

The Bottom Line

In most cases, we’d absolutely recommend calling a brand ambassador a W-2 employee. If you need advice on your specific situation, our team knows this stuff inside and out. 

If one or more of the following statements is true for you when it comes to onboarding freelancers, it might be time to reconsider your methods:

1. We spent more time onboarding freelancers in 2021 than we did in 2020
2. Our team has a basic understanding of the terms exempt, non-exempt, W-2, and 1099 but can’t define them in our sleep  
3. The above terms give me a headache
4. We have workers in multiple states

The Challenges With Onboarding  

One of the hardest (and most important) things about setting up your workforce is classifying workers correctly. That’s why we cover worker classification extensively here on our blog. On a day to day basis, it’s important to know who’s a strong worker, who might need a little bit of help, and who has potential to grow into other roles. On the front end, accurate worker classification is crucial to preventing issues later. With the Department of Labor’s ever-increasing focus on worker classification errors, it’s incredibly important to get it right up front. 

Another incredibly important aspect of bringing on new workers is making sure you’re paying them accurately and in a timely manner. This includes payroll taxes. Since each state has strict pay deadlines for specific types of employees it’s important (and hard!) to stay on top of the ever-changing wage laws at the federal, state, and local levels. Along with differing wage laws, some states and localities require a different taxation method than the federal government does. 

Enter PayReel

If offloading some of your onboarding paperwork would free up your time and energy for the creative parts of your projects, it might be time to consider bringing on a partner. PayReel is equipped to manage events, employees, and all the associated paperwork. Our team stays well versed in local, state, and ever-changing federal tax methods and laws to make sure employees are happy, clients are covered, and the IRS is bored. 

Here’s where we stress (and the only time we stress), we got it.

Whether it’s a massive event or a one-camera shoot, when PayReel manages your projects, it’s the best for clients and workers alike. We’re devoted to making every single client and worker interaction a good one, which makes working with you mighty attractive for workers.

Make your life easy and your workers happy

1. Make events of any size a breeze

Whether you’re payrolling thousands of workers, sending a crew to an NBA game, or something in between it’s nice to know all the details are handled. 

2.  Humans when you want them. Automation when you don’t.

Things don’t operate on a nine-to-five schedule and neither do we. We have an after-hours phone so we can be sure to provide speedy answers. And our online system allows you to take care of just about anything…at any hour…with a few taps or clicks. 

3. No trees were harmed in the making of this paperwork 

Not having to sift through piles of identical paperwork cluttering up your desk and your headspace makes the process quicker and easier for you and for your workers. Paperwork without the paper? Yes, please! 

4. Speedy payment

Workers submit timecards on Mondays and we pay them on Fridays. When they’re paid quickly, they don’t need to call your office, which frees you up to do your job better. Of course, it also keeps workers happy so they are free to focus on your project and happy to come back for your next event.

5. Happy workers

Speaking of keeping workers happy, the last thing you need once you’ve hired people is to lose their loyalty on the back-end details. Whether they’re working for one day or for a month, we make sure workers get paid quickly and accurately so if you want to hire them again, they’ll be ready to pick up the call.

As Michael, one of the freelancers PayReel pays, said, “[My Customer Experience Manager] has been superb in addressing whatever problems I have had.”

6. Event payroll as easy as 1, 2, 3, w-4

By managing all the payment details, including the mountains of W-4s, payroll becomes a non-event.

The bottom line

You work with us because we make your life easier. Why not use us for all your events and workers? Not only does our team manage event payroll and payroll taxes; as the employer of record, we even take on all risk associated with a variable workforce. Think you might benefit from hiring a payroll service? Here’s a handy guide to find out more. Or contact us at 303-526-4900.

Employer of record (noun):

a) a company or organization that is legally responsible for paying employees, including dealing with employee taxes, benefits, insurance, etc.

b) your secret weapon for eliminating red tape for hiring and keeping you out of court

While you’re not going to find that second definition in the dictionary, it’s certainly one of the top benefits of partnering with an Employer of Record (EOR). Let’s take a look at the reasons some companies outsource this important part of their business.

What are some of the top benefits of having an EOR?

An EOR serves as the employer and takes on all related responsibilities and liabilities while employees work for another company. An EOR does some or all of the following:

• Makes hiring new workers enormously easier and faster
• Covers payroll management for freelancers
• Maintains current headcount
• Guarantees on-time payment
• Handles all compliance issues
• Provides workers’ comp and all necessary insurance for contractors
• Conducts background checks and drug screenings
• Turns a mountain of hiring paperwork (certificates of insurance, I-9s, E-verify forms, and so on) into a mole hill
• Terminates employees, administers benefits, and handles some worker issues

Who needs an EOR?

We find that clients with a lot of freelance hiring needs on tight deadlines benefit greatly from partnering with an EOR because it makes onboarding–often one of the most painful parts of the process–a nonissue. They also love that outsourcing many of these services helps eliminate or at least reduce the need for an internal HR department. Since we specialize in these services, we have systems in place to make everything as efficient and smooth as possible. Sometimes, it’s the difference between staffing and finishing projects on time and tanking a project before it really even gets off the ground.

Bottom line

Not every company needs an EOR, but for those who do, it’s a game changer. If you think your might be in the latter category, reach out to us and we’ll talk through solutions for your unique situation. Your life is about to get a whole lot easier.