What is a pet service to do when it comes to hiring dog walkers and pet sitters? Should they go with independent contractors or employees?

Let's look at the IRS' own advice on how to determine your workers and to view this article in detail you can click here.

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1. The IRS uses three characteristics to determine the relationship between businesses and workers:
   
   
   
   
   • Behavioral Control covers facts that show whether the
     business has a right to direct or control how the work is done through
     instructions, training or other means.
     
     
     
     
   • Financial Control covers facts that show whether the business
     has a right to direct or control the financial and business aspects of
     the worker's job.
     
     
     
     
   • Type of Relationship factor relates to how the workers and the business owner perceive their relationship.
     
     
     
     
   
   
2. If you have the right to control or direct not only what is to be
   done, but also how it is to be done, then your workers are most likely
   employees.
   
    
3. If you can direct or control only the result of the work done -- and
   not the means and methods of accomplishing the result -- then your
   workers are probably independent contractors.
   
     
4. Employers who misclassify workers as independent contractors can end
   up with substantial tax bills. Additionally, they can face penalties
   for failing to pay employment taxes and for failing to file required tax
   forms. 
   
   
   
   
5. Workers can avoid higher tax bills and lost benefits if they know their proper status.
   
    
6. Both employers and workers can ask the IRS to make a determination
   on whether a specific individual is an independent contractor or an
   employee by filing a Form SS-8, Determination of Worker Status for
   Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS.

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The fact is if you run your company with independent contractors you are leaving yourself exposed to potential issues with the IRS if you don't treat your workers like independent contractors. Personally I don't believe you can run a pet service professionally with all the guidance that is required without treating your workers like employees.

What is involved with making your workers employees? You'll need to contact your accountant to go over this but do bear in mind your costs per worker will increase considerably as an employee. You can estimate your cost for every dollar you pay your workers will be 10-12% roughly (but again please confirm with your accountant.) I'm sure the idea of added costs scares you now but consider the potential damage to your company if you ran into problems with the IRS. Or if one of your ex workers went to apply for unemployment and it turns out you weren't contributing to unemployment. Or one of your workers got hurt and you didn't have workers' compensation and disability insurance (discuss with your accountant or lawyer getting this no matter what you decide to classify your employees as.) Those risks to me seem to far outweigh the benefits of not having employees.

How do you cover the extra costs if you go with employees? You need to bake that added price into what you charge your clients. So if you charge $10 a walk you'll want to raise your prices to $11.50 etc. You can run a pet service with employees, you just need to plan accordingly and again do the math with your accountant and make sure you get the math right. Will you lose some clients when you raise prices? Sure, but you'll replace those clients, and your company will be much more appealing than it was before if you can now say my walkers and sitters are employees. We have policies in our company and our employees follow them. And your life will be much easier with your workers too. No longer will you have to hold back when it comes to implementing the type of service you want carried out.

One note. If you presently have ic's and decide to change to employees do be prepared for a rocky transition with some of those ic's. To lessen this you might want to gradually role out changes for your existing workers but have all new workers who come in only know the idea that they are an employee of your company, carrying out your philosophies. If you're responsible for your employees' health and take on the liability of their actions, then you surely should be able to take part in the important decisions they make on a daily basis.

If you'd like help deciding what's best for your company please check out our consulting service by clicking here

*** What are your thoughts on the subject on employees vs ic's in the pet industry? Let us know below...