Paid as employee vs. independent contractor...why is this even an issue?

[Dreamstalker]

I've been "promoted" to dealing with publisher returns. Not too bad I guess. That will also be commissioned (15% of whatever the returned amount is). Presently I'm salaried plus a commission of all online and mail order sales.

The ebay stuff is starting to creak into gear, and I'm gradually getting the office into some semblance of organized (I recently found all the blueprints for the store, which were squinched up in a corner and some were water-damaged--I need to talk to bossman about buying a tube case for them). Let's not get into the backups and everything else important thrown into boxes, and everything including the server in the vicinity of the sewage pipes (they seem sound, but the very idea just worries me)... In theory I could make the backups and stuff more organized, but that's not in my job description so I'm not even going to try.

The owner has been talking about paying me as an independent contractor, which doesn't seem to make sense now that I will be doing work in-store (not that I'm not already, but returns will mean that I'll be in more often) and me setting myself up as an LLC. Initially, it sounded like a good idea, but now that I've talked to my dad (who consults on this very thing) about it, it seems pointless. Only benefit seems to be if I were doing something that someone could potentially try to sue me for, which I'm not.

Can anyone come up with reasons why this would be suggested? I'm just puzzled. At first I was thinking there was some complication involving the commission payments, but could that not simply be tacked onto my base pay (I would of course be keeping track myself)?

[Glutton4Punishment]

It sounds to me like he is trying to get out of some paperwork. If he pays you as an IC it is up to you to keep track of all your own payroll taxes (quarterly) instead of just income tax..

Just a thought.

[Gurndigarn]

Not only that, but it's easier to fire you without having to pay unemployment. And he doesn't pay the employer tax on you, or benefits.

Do NOT take it without a serious increase in pay (enough to cover taxes, benefits, and enough so that you're not worried about unemployment) AND an actual contract guaranteeing you a certain time length of work. If you're going to be self-employed, cover your tail really well.

[BookstoreEscapee]

If you are a paid employee, does that include benefits (medical insurance, etc.)? That might be another consideration for them wanting to keep you as an IC.

[Dreamstalker]

I don't think he gives benefits (I have my own medical--crappy as it may be--anyway; in order to be "upgraded" to the non-crappy plan I need to be employed). Very small business, single owner.

Regardless, logic dictates that if I am working physically in the store doing store duties (i.e. customer orders and publisher returns), I'm considered an employee, ne? I've told him I want to be paid as an employee, I'm going in tomorrow to ship a few things out so we'll see. I did technically consult an expert who told me it would be pointless to go the IC/LLC route (at least now).

[Pedersen]

Well, wait... Here's an option to consider: He wants to get rid of the paperwork (99% guarantee). You want better benefits.

I've not used them myself, but http://www.mybizoffice.com/ might fit your needs. Basically, you're an IC, but you're not. You're a permanent employee of MyBizOffice (just like where you work now). You get all the tax advantages of being an employee, plus (if you get sufficient pay) better benefits, and he gets rid of a bunch of paperwork issues.

Might be worth a look-see, if nothing else.

[Dreamstalker]

Huh, thanks, didn't know about that site. I'll check it out.

(for the present time, I do believe it would behoove me to be paid as an employee, until such time as I can do in-depth research).

[bob the goat]

1) If you are a contractor you do not receive medical benefits. If you have medical, they are probably paying a LOT that you don’t know about.

2) They don’t pay a portion of your income tax.

3) You are not covered by their unemployment insurance.

4) You are not covered by their group life insurance (if any).

5) You are not covered by workman’s comp.

6) It frees them from a lot of liability. If you screw up they can sue your business.

[Dreamstalker]

I am remaining an employee for now; from what I can figure, my pay above the base rate for a 10-hour shift is based on projected sales. Not the best way to do it IMO (he's not even keeping track of the actual sales, I am), but I'm at least getting a guaranteed amount.

I still believe he's never dealt with commissioned employees before so doesn't know how to work it (IIRC, the commission amount is simply added on to the base pay on one's paycheck; he was/is thinking it would require two checks).

Basically, I was told by my dad that unless I was already self-employed an LLC would be more hassle than it was worth.

[wagegoth]

The IRS has serious regulations on who can be an independent contractor as opposed to an employee; they also have regulations on who can be salaried (flat amount of pay) and who must be paid an hourly rate.

Check out the requirements (probably on the IRS website), and have them ready if your boss brings up the topic again.

[Dips]

It sounds like you've chosen to stay as an employee and that makes a lot of sense.

If you think about changing your mind, you will want to keep one more thing in mind. If you become an independent contractor, your FICA and Medicare payments will DOUBLE.

Because you will be paying both your share AND the employer's share.

Many employers like to make employees into independent contractors to avoid paying their share of FICA/Medicare.

But the law doesn't let employers just unilaterally change all their employees into ICs.

Basically, you cannot make an employee an IC if you continue to control when and how he does his job.

A contractor can have a deadline to complete a job, but you cannot determine his schedule. If your boss sets your hours from week to week, you are an employee, not a contractor.

A contractor is paid for accomplishing a job as described in the contract, but you cannot dictate the details of how he does that job. If your boss tells you how to do the job and/or assigns tasks to you in the course of your work, you are an employee, not an independent contractor.

You can find some general information here (including examples and links to more details):

http://www.irs.gov/businesses/small/...=99921,00.html

I hope that information helps if you are thinking of changing your status in the future. You wouldn't want to cause your boss to accidentally run afoul of the law (especially if you like him ); the penalties for misclassifying employees as ICs can be steep.