Replies to This Discussion

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 2:08pm

Karen,

I can tell you that this not a problem with those that work with us they are all 2nd incomes for their family who are all wealthy and would not be able to work 9-5 hours and that is why they like the flexibility of working as a of the contractor on their own time.



Please Everyone, there are too many of us Not receiving Unemployment benefits today! I know of recruiters who have Lost Homes, due to not having any money from unemployment or SSI because they were misclassified. This is a Pervasive problem in our industry, and one that has me completely horrified that we In the HUMAN Resource field have continued to perpetuate, especially through ignorance.

Permalink Reply by pam claughton on February 20, 2009 at 2:09pm

Karen,

Overtime could apply to a contract recruiter, one who is paid on an hourly basis, but not for an agency recruiter who is paid solely on commission, not by the hour.

~Pam

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 3:23pm

Karen,

So what you are saying is that for this not to be an employee we would have to submit every candidate they send us? We don't oversee there work they send us a resume and if they are good for the job we submit them if not we don't. Same as if we did a split agreement with another firm. Would this other firm be considered an employee? They are 1099 employees because they choose to, there is nothing unfair about it. They pay and write off their own expenses and work on the time of their choosing. By contract it is precisely as you describe we say we will pay you this amount based on successful referrals. How is that different than a referral fee really.

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 3:43pm

Karen,

As long as they are an Attorney that has worked for a large firm or has recruiting experience with Attorney's we would consider them as an employee.

Permalink Reply by Joshua Letourneau on February 20, 2009 at 3:53pm

This discussion is classic. This is what it sounds like I'm hearing:

"Dear Prospective Recruiter Candidate,

I am honored you would like to entertain a second job with my firm. Today, I would like to offer you a 1099 contract agreement. It goes like this: If you fill a job, I get to keep 50% of your billings and I pay you the other 50% of your commission in the form of a 'referral fee', upon which you'll receive a 1099 at the end of the year."

I've never received an offer like that, but I've come to learn that, in our space (much like Financial Services), anything is possible.

I love this job :)

P.S. If anyone ever made me that offer, I hope they expect to hear nothing but crickets chirping on the other end of the line :)

Permalink Reply by Martin H.Snyder on February 20, 2009 at 4:36pm

This webpage discusses some of the classification aspects. Many recruiters do work on a 1099 basis, but you have to be very careful about the rules or you could be on the hook for back FICA, Payroll, and other costs.

Excerpts from the page:

The following are a list of 20 questions the IRS uses to determine if a worker is an independent contractor or employee. The answer of yes to any one of the questions (except #16) may mean the worker is an employee.


Is the worker required to comply with instructions about when, where and how the work is done?


Is the worker provided training that would enable him/her to perform a job in a particular method or manner?


Are the services provided by the worker an integral part of the business' operations?


Must the services be rendered personally?


Does the business hire, supervise, or pay assistants to help the worker on the job?


Is there a continuing relationship between the worker and the person for whom the services are performed?


Does the recipient of the services set the work schedule?


Is the worker required to devote his/her full time to the person he/she performs services for?


Is the work performed at the place of business of the company or at specific places set by the company?


Does the recipient of the services direct the sequence in which the work must be done?


Are regular oral or written reports required to be submitted by the worker?


Is the method of payment hourly, weekly, monthly (as opposed to commission or by the job?)


Are business and/or traveling expenses reimbursed?


Does the company furnish tools and materials used by the worker?


Has the worker failed to invest in equipment or facilities used to provide the services?


Does the arrangement put the person in a position or realizing either a profit or loss on the work?


Does the worker perform services exclusively for the company rather than working for a number of companies at the same time?


Does the worker in fact make his/her services regularly available to the general public?


Is the worker subject to dismissal for reasons other than non-performance of the contract specifications?


Can the worker terminate his/her relationship without incurring a liability for failure to complete the job?

Non-Employee Requirements

To qualify a person as an independent contractor under Section 503 of the 1978 Revenue Act, the following three (3) requirements must be met:


You must file 1099 miscellaneous income forms (if over $600)


Similar workers must be treated alike (not treated as employees)


There must be a good reason for the contractor status


IRS Interpretations

The IRS uses the 20 factors (listed previously) to determine if a worker is an employee or an independent contractor. However, it is their interpretation (although it could be challenged). Not all factors apply in each case or carry the same weight.

According to the IRS, workers are employees if they must comply with the employer's instructions about their work, receive training or direction from the employer, provide services that integrate into the employer's business, render their services personally (can't subcontract), have a continuing working relationship with the employer, must follow set hours of work, work full-time for the employer, perform the work at the employer's site, regularly report to the employer, are paid regularly (e.g. weekly), are paid for business expenses, use the employer's tools, materials, etc. lack a major investment in facilities used to perform services, cannot make a profit or suffer a loss from their services, work for one employer at a time, do not offer services to the public, can be fired, may quit work at any time and not incur a liability. Thus, to qualify as an independent contractor, the opposite of all of these would be true. But remember, the IRS selects the questions and grades the answers.

Statutory Employees and Statutory Non-Employees
The Federal code list the following four occupational groups as not being employees under the Common Law Rules (20 questions), but are employees under the Statutory Rules:


Agent Drivers or Commission Drivers: Must be licensed, paid on a commission basis, and a contract must exist stating the agent will not be an employee for federal tax purposes.


Full-time Life Insurance Salesperson (one company)


Homemakers: Work at home for one employer making clothing, needlecrafts, bedspreads, buttons, quilts, gloves, etc.


Traveling or City Salesperson: Sells for one principal employer.

The following are Statutory Non-Employees according to the Federal code. According to the Federal Code, the following are considered not to be employees, but are independent contractors under statutory rules.


Qualified Real Estate Agent: Must be licensed, paid on a commission basis, and a contract must exist stating the agent will not be an employee for federal tax purposes.


Direct Seller: Sells consumer products outside a permanent retail establishment, is paid on a commission basis, and a contract must exist stating the salesperson will not be an employee for federal tax purposes.

Strategies for Business Owners
If there is some question as to whether or not a person is an independent contractor of employee, the following may help convince the IRS the person is truly an independent contractor.

The business should have the person sign a written agreement attesting to the fact that he/she is an independent contractor.
The person should actually bill the business for the services rendered.
The person should be required to have their own worker's compensation coverage.
As much independence as possible should be given in areas such as hours worked, where the job is to be performed, etc.
The person should provide his/her own tools, supplies training, transportation, etc.
The ultimate safeguard is to complete a Form SS-8 which asks the IRS for a determination if the person is an employee.

For more information, see IRS Publication 937.

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 4:56pm

Joshua,

This is not there 2nd job but a 2nd income in their house meaning their spouse has a full time job and they don't need the job. And you wouldn't get a letter like that since they came to us through a prior relationship. Like I said earlier instead of starting their own company this is an alternative. They don't have the time or the schedule to show up at an office and work from 9-5 but are just looking to make some extra money working on their own time. It is a good situation for some and obviously wouldn't be for someone like you who has probably worked as a recruiter for years. We keep 50% because we pay all the expenses such as database, attorney lists, client gifts and meals ect. as well as have the job orders. 50% is actually standard in this industry for full time commission recruiters.

Also tax wise it is a lot more beneficial for them to be paid 1099 than W2.



"Dear Prospective Recruiter Candidate,

I am honored you would like to entertain a second job with my firm. Today, I would like to offer you a 1099 contract agreement. It goes like this: If you fill a job, I get to keep 50% of your billings and I pay you the other 50% of your commission in the form of a 'referral fee', upon which you'll receive a 1099 at the end of the year."

I've never received an offer like that, but I've come to learn that, in our space (much like Financial Services), anything is possible.

I love this job :)

P.S. If anyone ever made me that offer, I hope they expect to hear nothing but crickets chirping on the other end of the line :)

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 5:00pm

Karen,

We don't oversee there actions we send out open job orders and if they have candidates they send them over or if they can choose to do a search. We simply supply the tools for them to make placements. We don't tell them what to do or how do do it, but we do offer suggestions to help them be successful. It is up to them whether to take our suggestions or not.

We have an accountant that guides us as well as counsel from a labor and emplyment attorney. I didn't mean for this to get into a big thing just wanted to give some advice but bottom line I agree with you just run everything by your accountant and have reviewed by a labor attorney.

I am not an attorney and I am not privy to your contract - your work environment, or how you handle your "employees" / "contractors" -- all I can do is go by what you say.. If you oversee the actions of your contractors, and tell them what to do, how to do it, and when to do it, then there is a high likelihood that an employee relationship is established.

Permalink Reply by Jim Durbin on February 21, 2009 at 3:22pm

This discussion is one of the reasons it's going to be so hard to pull ourselves out of recession.

You'd have to be a bloody fool to hire employees if the IRS and DOL start really cracking down on businesses. These rules supposedly help employees, but what they really do is make sure that only large companies with money to pay for employment attorneys ever do the hiring.

In countries that make it hard to hire, unemployment is endemic (France and Germany), or underground (Italy). The pain of getting rid of a bad worker is so high, companies are reluctant to hire, which leads to 10% unemployment and (50% for people under the age of 25).

Most recruiters are small businesses, but as is very clear, you can lose your business if you hire someone. You take all the risk, and the employee gets "taken care of" by the nanny state government, which is really just bureaucrats without the ability to run businesses themselves.

Take a look at how many staffing firm owners layed off all of their employees, cover their own reqs, and now make as much net profit as they did with a lot less stress. Ask them if it's worth it to hire someone, train them, and hope it works out. Especially with taxes clearing needing to go up to 50% on high earners to cover our debt, more strict rules, less overall business, and so much paperwork that you don't get to actually do your job.

Karen, you might be right about the rules, but the rules stink.

Again I say - Who is John Galt?

Permalink Reply by Keith Halperin on February 21, 2009 at 5:27pm

Hi Folks,

I believe that some of the conditions mentioned will contribute to what I call the “Professional Sports Model” of recruiting, where there will be a substantially reduced number of well-paid world-class recruiters offering high value-add services difficult to eliminate, automate, or outsource. Most of the folks being discussed here as employees or contractors won’t factor in, because while some may be quite good, they probably won’t be quite good enough to compete in this new market.

Cheers,

Keith “What makes YOU so special?” Halperin
keithsrj@sbcglobal.net

KarenM / Hirecentrix.com said:

Jim
I respect your comments but I also disagree. These rules don't stink, and there are many companies, including recruiting companies that have grown extensively by hiring individuals the correct way!

What made this country fail is Greed and Fraud.. when you screw the employees over, and cheapen labor, then there is no one left to buy the product that you have to sell.. It is Reaganomics in Reverse.. That is what happened in America.. -- IT is THIS fraud and Abuse THAT GOT us into this recession in the first place

You can't keep Feeding the Top of the Tree, ignore the base and the Roots, and expect the tree to survive.. 98 Percent of the Population are the Roots and base of the tree

For the past 8 years, our misery index Rose to abnormal highs, whilst were were lied to about how great the economy was.. We saw more and more Americans have their jobs displaced by foreign labor, - Cheap foreign labor..

Did the product get cheaper in Cost? No, but it got cheaply made, and guess what, with the jobs lost, there became less and less consumer buying power..

The CEO's got richer.. and We see that 98 Percent of America's wealth was controlled by 2 percent of the Population.. These people by the way don't buy the Mass produced product that Most companies manufacture, produce or service..

So who was left to buy the Mass product? You? me? the average Joe who didn't have a job anymore? or the individuals in his neighbourhood who depended on his dollar..

It was the individuals who perpetuated the fraud and said, He employee, we don't care about You, and what You bring to the table.. we only care about making sure that My OffShore Account gets' bigger.. and who cares if I lose my job, or the company get's bankrupt.. shoot my pocket is full.

Jim, in American the Small Business is the Largest Employer.. and yes, there are many who grow effectively, and prosperously, w/o having to worry about the IRS or FSLA .

They don't worry about the IRS or FSLA, because they don't try to Cheat their Employees, and they don't try to screw the system.. which in the longrun, creates Extremely anti competitive and Unfair business practices..

AND I AM a small business owner -- actually I own 2 today.. and Hopefully will be employing employees with our growth.. Retention I believe will not be a problem, because I plan to pay fairly and competitively..

Wow, thanks for letting me get this off my chest..

and No, I don't think that these Rules SUCK -- because I have been an Employee, like most of the World, and I know what it is liked to be abused and screwed over by employers.. where your hard work is taken advantage of, not recognized, and definitely not reimbursed as it should be or as promised..

karen



Jim Durbin said:

This discussion is one of the reasons it's going to be so hard to pull ourselves out of recession.
You'd have to be a bloody fool to hire employees if the IRS and DOL start really cracking down on businesses. These rules supposedly help employees, but what they really do is make sure that only large companies with money to pay for employment attorneys ever do the hiring. In countries that make it hard to hire, unemployment is endemic (France and Germany), or underground (Italy). The pain of getting rid of a bad worker is so high, companies are reluctant to hire, which leads to 10% unemployment and (50% for people under the age of 25).

Most recruiters are small businesses, but as is very clear, you can lose your business if you hire someone. You take all the risk, and the employee gets "taken care of" by the nanny state government, which is really just bureaucrats without the ability to run businesses themselves.

Take a look at how many staffing firm owners layed off all of their employees, cover their own reqs, and now make as much net profit as they did with a lot less stress. Ask them if it's worth it to hire someone, train them, and hope it works out. Especially with taxes clearing needing to go up to 50% on high earners to cover our debt, more strict rules, less overall business, and so much paperwork that you don't get to actually do your job.

Karen, you might be right about the rules, but the rules stink.

Again I say - Who is John Galt?

Permalink Reply by Jim Durbin on February 22, 2009 at 10:35am

Karen,

California, the state where you work, is experiencing a net migration loss, and has been since 2003. Businesses and individuals are fleeing the regulatory problems of a government that institutes "fairness" for employees. The result? Some of the highest unemployment in the country despite having what was once the world's seventh largest economy. That's a pretty strong argument that the regulatory environment of your state has tipped too far past sanity for business owners.

There is a limit as to how much regulation business can take on - and it's clear your state has reached it.

As for your complaints about CEO's - this hogwash of a stimulus bill just gave $1 billion in tax breaks to Paul Allen, the owner of Charter Communications. Meanwhile, small business get next to nothing, except a horde of regulations that make it harder to compete with large corporations. Big companies love regulation - because they have the campaign contributions and access to tweak it in their direction. They have the money to absorb foolish costs.

Small companies live in fear of such government regulations. And for those able, offshoring is the answer. You want jobs in the US? Quit screwing the people who make the jobs!

http://www.theagitator.com/2009/02/12/new-law-cripples-small-and-in...

This thread is about commission only employees. Jason's experience proves our point. There's too much risk in hiring. He still wants to grow, but he's not willing to risk his company to do so. And every hire is a risk that could end your company and bankrupt you. Who in their right mind would hire someone under those conditions? The conditions you want to impose!

Maybe if we had more common sense laws, and less corporate-leaning employment giveaways, he could do the right thing and hire people. Maybe if laws weren't constantly expanded to buy votes giving new "rights" to healthcare, a "living wage" or "fairness" as defined by a bureaucrat who has never held a real job, we wouldn't be facing a long-term slide into permanent 10% unemployment.

Look at France, Germany, and Italy. You know the job you want in those countries? A government job. You don't want to be the underclass there, where 50% of the poor and immigrant are unemployed.

I personally prefer freedom. I don't assume business owners are crooked and employees are noble. But then again, I take responsibility for myself and pay my taxes, mortgage and healthcare insurance. Guess that makes me a sucker in today's economy.

Permalink Reply by Todd Kmiec on February 22, 2009 at 12:10pm

Jim,

Ditto, Ditto, and more Dittos.

Todd Kmiec

Jim Durbin said:

Karen,

California, the state where you work, is experiencing a net migration loss, and has been since 2003. Businesses and individuals are fleeing the regulatory problems of a government that institutes "fairness" for employees. The result? Some of the highest unemployment in the country despite having what was once the world's seventh largest economy. That's a pretty strong argument that the regulatory environment of your state has tipped too far past sanity for business owners.

There is a limit as to how much regulation business can take on - and it's clear your state has reached it.

As for your complaints about CEO's - this hogwash of a stimulus bill just gave $1 billion in tax breaks to Paul Allen, the owner of Charter Communications. Meanwhile, small business get next to nothing, except a horde of regulations that make it harder to compete with large corporations. Big companies love regulation - because they have the campaign contributions and access to tweak it in their direction. They have the money to absorb foolish costs.

Small companies live in fear of such government regulations. And for those able, offshoring is the answer. You want jobs in the US? Quit screwing the people who make the jobs!

http://www.theagitator.com/2009/02/12/new-law-cripples-small-and-in...

This thread is about commission only employees. Jason's experience proves our point. There's too much risk in hiring. He still wants to grow, but he's not willing to risk his company to do so. And every hire is a risk that could end your company and bankrupt you. Who in their right mind would hire someone under those conditions? The conditions you want to impose!

Maybe if we had more common sense laws, and less corporate-leaning employment giveaways, he could do the right thing and hire people. Maybe if laws weren't constantly expanded to buy votes giving new "rights" to healthcare, a "living wage" or "fairness" as defined by a bureaucrat who has never held a real job, we wouldn't be facing a long-term slide into permanent 10% unemployment.

Look at France, Germany, and Italy. You know the job you want in those countries? A government job. You don't want to be the underclass there, where 50% of the poor and immigrant are unemployed.

I personally prefer freedom. I don't assume business owners are crooked and employees are noble. But then again, I take responsibility for myself and pay my taxes, mortgage and healthcare insurance. Guess that makes me a sucker in today's economy.

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