Because all fifty states are working with other agencies looking to ensure employee rights are covered, and the state, local, and federal payroll taxes are paid. As an employer, among your responsibilities, are these:

• Pay workers' compensation
• Meet wage and hour requirements
• Pay unemployment tax
• Maintain a safe workplace

Since our office is located in Lynnwood, WA, as an example: Washington State Labor & Industries has several definitions to decide whether or not the contractor you hire is a contractor or an employee, and here are a few:

1. Supervision: Do they perform the work free of your direction and control?

2. Separate business: Do they offer services that are different from what you provide?

3. Maintenance: Do they maintain and pay for a place of business that is separate from yours?

4. Location: Do they perform services in a separate location from your business or job sites?

5. Previously established business: Do they have a based, independent company that existed before you hired?

6. Required documentation: May include other customers or advertising.

7. IRS Taxes: When you entered into the contract, was this person responsible for filing a tax return with the IRS for their business?

8. Necessary registrations: Are they up-to-date on their required local, county, State, and Federal business registrations?

Ask your State's Department of Revenue if their business license is active.

If they are a construction contractor, check their contractor registration or electrical contractor's license. If they have employees, check their workers' compensation account and claim history. In Washington State, you can do it through The Department of Labor And Industries.

Do They Maintain A Useful Contractors Bookkeeping System?

Do they maintain their own set of bookkeeping records dedicated to the expenses and earnings of their business? Note: If you plan to treat your worker/subcontractor as an independent, make sure you can prove they are. For your protection, you should always ask the person you are hiring to show you proof; otherwise, you could be liable for all of their employment taxes and all of the employer taxes plus fines and penalties.

Options for additional short term employees:

1. Use a temporary labor service

2. Hire a legitimate contractor

3. Add employee – pay all the taxes

You can hand over tasks you don't have time for – at a fraction of the cost of an employee. Unlike staff, you won't owe a contractor payroll taxes, unemployment insurance, health insurance, or other employee benefits.

Because subcontractors aren't employees, however, they do need to be managed differently. They're accustomed to being their own bosses, for one thing. And because they may work for several companies at one time, they may have divided loyalties.

These tips will help you get more for your money (and minimize undue stress) when hiring an independent contractor.

Hire well

From the outset, you'll minimize the need to manage a contractor by carefully screening anyone you consider for the job.

Interview contractors with as much diligence as you would a potential employee – and be sure to follow up with references. Before you sign any contract, you want to make sure a potential hire is

• both qualified and a good fit for the job
• responsible and easy to work with, and
• will most likely want to continue working for you.

Keep in mind that high turnover is a costly problem for small business owners. If you find out in an interview that a contractor is working for several companies, you might want to consider hiring someone else.

When you do find someone you hope to work with long term, pay them well and take care of them to make them feel they're a part of the team so they'll stay motivated – and stick with you.

Be clear about the scope

Employees have job descriptions to define their roles and responsibilities. Independent contracts, by comparison, follow a scope of work agreement that outlines their project guidelines, timeline, and payment terms.

Defining the scope of work upfront in writing and how any changes will be managed saves time, confusion and ultimately protects both of you.

You'll simplify the process for working together by laying out your expectations for how the work will be delivered upfront. Your contractor will avoid the dreaded "scope creep" that can happen when a project changes without additional compensation built into the contract.

Stay on track

The best way to keep your contractor on task – without micro-managing the project – is to set milestones together and regularly communicate on progress.

For instance, you might agree that project targets and deliverables will be met by specific dates, which you'll both track via a collaborative cloud-based document sharing system, like Google Drive, or a project management tool for contractors.

To ensure those milestones will be met, agree to a weekly progress report by email or phone. If an issue arises, you'll be able to address it before it gets out of hand and puts the success of the project at risk.

Final thoughts

The best independent contractors are professionals and shouldn't need much managing from the construction companies that hire them. Ideally, they'll need a bit of guidance to perform the work to your standards and expectations.

The tips offered are proactive measures, by and large, so you don't have to spend much time managing a contractor. Instead, you'll spend the bulk of your time following up on progress to make sure the job gets done, rather than working each step of the process.

Communicate, upfront and in writing, to create clear expectations on both sides – and avoid excessive backtracking to ensure the work you've outsourced is completed up to par.

P.S.

It's almost spring. We have an ongoing promotion for our blog subscribers and podcast listeners! You can use this code in both our Fast Easy Accounting Store and Construction Accounting Academy for a 30% Discount:

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Code is valid up to next Sunday, March 28, 2021, at 11:59 PM. (Please note: Offer does not apply to Outsourced Accounting, Bookkeeping Review, or any Consultation and Training products; you can use it, however, to purchase any course or monthly subscription classes in Construction Accounting Academy).