Hiring is good news for your business.  It is growing and more help is needed.  However, should you hire a new employee or an independent contractor?  Consider the pros and cons of hiring an employee or an independent contractor:

Pros of Hiring An Independent Contractor

·        Reduced Costs:  Payroll, benefits, and other overhead are reduced.  Such reduction in overhead can mean less pressure to bring in new business revenue to cover the costs of the added labor.

·        No Health Benefits:  Deserving of specific mention is the huge burden on small businesses is the ever increasing costs of employee health benefits.

·        Use as Needed:  Independent contractors may agree to work inconsistent numbers of hours based on your small business’s changing needs.

·        Specific Expertise:  Your small business can select someone who already has the specific expertise that you require for a particular project.

Pros of Hiring An Employee

·        Flexibility: Employees can be much more flexible in different areas and as changes in tasks require. 

·        Single Minded Loyalty: An employee is likely to have a much stronger loyalty, which can mean more productivity as well as a long term investment in the growth of the business.

·        Knowledge of Business:  There is greater knowledge of your small business as a whole and see it in operation on a consistent basis.

Cons of Hiring An Employee

·        Burden of Payroll:  The burden of having to make payroll often means that your ability to count on your own paycheck is less consistent.

·        Additional Overhead:  In addition to the costs of employee benefits and payroll often comes the need for bigger space and more equipment.

·        Management Role:  As your small business grows in size, there comes with it the burden of training and supervising employees.  This can divert your attention from the business operations.

·        Legal Issues:  Your small business becomes exposed to worker-related lawsuits. There are many laws that must be addressed and complied with.

Cons of Hiring An Independent Contractor

·        Loss of Control:  Part of what makes a contractor independent is their ability to choose the projects they take and how they perform them.  Contractors may have outside projects and less commitment than an employee.

·        Rates Can Vary:  An independent contractor may charge different rates based on varying projects.  This unpredictability can may it difficult to ascertain the cost of a prospective project. 

·        Harsh Penalties for Misclassification:  If you make an error in classifying an employee as an independent contractor, you can be held liable for many penalties, including with respect to employment taxes, interest charges, and penalties. 

Given the severe costs of misclassifying an employee as an independent contractor, the rules should be carefully reviewed with an attorney prior to hiring. 

Visit our Corporate & Business Law Department at www.hoganwillig.com.

Make sure you know the rules.

The old adage “get it in writing” is critical when it comes to commissioned sales employees. In fact, the New York Labor Law provides that you must have a detailed written agreement that is signed by both the employer and the commissioned sales employee.

How detailed must the written agreement be? At a minimum, the written agreement must include:

Read on…

Tags: commissioned employee, commissioned sales, department of labor, labor law

Your customer list is the very heart and soul of your business. Should it fall into the hands of a competitor, your business could suffer a loss of some or its entire customer base. This can jeopardize the success if not the very survival of your business. However, there are specific steps that businesses can take to help prevent the disclosure of its customer list.

When courts look at whether your customer list should be protected, it is a determination of whether it qualifies as a “trade secret.” Read on…

Tags: competitive advantage, customer base, customer list, customers, non-disclosure agreement, trade secret

It is becoming very common for contracts to contain a clause stating that “Any and all disputes arising under this contract will be settled by arbitration.” Arbitration is simply an agreement between parties that their disputes will be settled through arbitration rather than in court. Arbitration is favored by federal and state courts as a form of “Alternative Dispute Resolution” (ADR) and is one of the fastest growing means of settling disputes. The dispute is submitted to a private, non-judicial person who often has practical knowledge of the matter in dispute.

Arbitration has many similarities to a court case, but there are also some significant differences. Read on…

Tags: ADR, alternative dispute resolution, arbitration, dispute

You can find just about anything on the Internet, from a meatloaf recipe to a Yorkshire Terrier. The Internet can be a valuable tool or a source of entertainment, but it is a risky place to find a commercial lease form. “One Size Fits All” Lease forms may contain seemingly appropriate legalese like “subrogation” and “condition precedent,” but if you don’t know what those terms mean, you shouldn’t use them.

Generally, commercial leases are Read on…

Tags: acceleration clause, breach of lease, commercial lease, liability insurance, liquidated damages clause