Independent Contractors vs. Employees

Click here to view online magazine Why hire employees and have to deal with payroll taxes, worker’s comp, TDI health insurance and other various mandated benefits? Wouldn’t it be simpler and cheaper to use independent contractors? Of course, it would! However, before you start turning all of your employees into independent contractors, let me tell you about an incident that happened to a friend of mine a few years ago. When my friend, a business owner, hired a salesperson, the two struck an agreement: My friend would pay in cash and no taxes would be withheld. The salesperson, who had a GET license, said he would pay all the required taxes. Being a trusting soul (and a bit ignorant of the law), my friend said it sounded like a good deal. He’d save money on payroll-mandated payments and benefits, and the salesperson would get paid without any withholding taxes deducted. Everything went well for a couple of years. Then one day, my friend caught the salesperson stealing and fired him. Well, I’ll bet you can guess what happened next. The ex-salesperson tried to file for unemployment compensation payments. When the unemployment office checked, there was, of course, neither a record of the salesperson working for my friend nor of any unemployment tax payments for him.