Contractors or Full-time Employees?
A big decision you will face at an early stage of your operation will be whether to recruit your own full-time employees or use independent contractors, or sub-contractors. The IRS provides a great overview of the difference between full-time employees and contractors at the following link: 20FactorTestforIndependentContractors.pdf
When your business is in the early stages, it can be quite pertinent to use sub-contractors when, and if, you need them, as opposed to recruiting full-time staff. This will keep your fixed costs down because you will only use the person’s services when you have work available, they will often provide their own transport and equipment, and will invoice you when the work is completed. This is also great for cash flow because you won’t have to pay a dime until you have received the money for the job yourself.
If you’re unsure as to whether full-time employees or sub-contractors are right for you, have a word with your accountant. He or she will be able to give you some sound advice that is relevant to your business and the state in which you operate.
Irrespective of whether you use sub-contractors or full-time workers, you should always check workers’ references to ensure that they have a solid reputation and experience of doing the work that you require them to perform. Background checks are important to ensuring that you recruit staff you can rely on and who can be trusted. Some firms also require drug testing, but that is at your discretion.
When performing a background check, you should verify that the individual has/can demonstrate the following:
- The legal right to work in the United States
- Clean driving license
- Experience of performing the job you require them to do
During the application stage, you should ask applicants to sign a consent form that will give you the legal right to run a background check on them and to verify their references. Background checks will set you back around $30-$60 and a drug test will be in the region of $40. This expense will most certainly be worth it. The people you recruit will represent you and your business. In addition, in the event that something goes wrong, and you find yourself facing a lawsuit, you will be able to demonstrate that you performed due diligence as an employer and did everything in your power to manage risk.
It is prudent to have two types of contractual agreements in place when you hire employees: an Independent Contractor Agreement and a Non‐Compete Agreement. These are designed to protect both yours and your employees’ interests, and will protect you from staff who complete your training and learn your business and then use their newfound skills to compete against you and/or steal your customers.
While these agreements are not entirely bulletproof, they will offer some level of protection and, at the very least, deter employees from setting up on their own at your expense. Before you put these contracts in place, ask a lawyer to give them the once over to ensure that you haven’t missed anything and have covered all the legal requirements of the state in which you operate.
When operating in this industry, it is crucial that you are fully familiar with all health and safety standards and that you adhere to them at all times. You should be particularly concerned with the OSHA, the Safety Standards and any local safety requirements and laws that are in operation within the state in which you are based. The OSHA has published a great guide to construction safety that is brief and straight to the point. You can find it here: https://www.osha.gov/Publications/osha3252.pdf
Providing your staff with full safety training is a critical responsibility as an employer. Ensure that all staff members are familiar with the safety standards and requirements before they commence work and that they follow safe practices at all times. Not only will this safeguard your reputation, it will also help you to keep your insurance costs to a minimum.
Depending on the work your employees are required to carry out, safety training can actually be quite simple and can be completed in as little as 20 minutes. Whenever you do hold safety meetings or training sessions, make sure you document that these took place and ask the attendees to sign to confirm their attendance. Topics that you may wish to include in your safety meetings could be:
- Your organization’s health and safety procedures
- The importance of following health and safety procedures at all times
- Employees’ rights to work in a safe environment
- Employees’ responsibility to behave in a safe manner at all times
- Dangers of taking drugs or drinking alcohol when working
- Disciplinary measures that will be used against employees who fail to follow safety procedures
- Policy for reporting and monitoring illness, injuries and accidents
- What employees should do in the event they sustain an injury while at work
- Return to work policies and procedures
- Compensation fraud
- OSHA requirements
- General first aid
- Use of personal protective equipment (PPE)
- Awareness of blood-borne pathogens
- Employee medical records and rights to confidentiality
- Job-related safety requirements
- Moving and lifting
- Fire procedures and what to do in the event of a fire
- Emergency action plans
- Handling chemicals
- Labeling chemicals and dangerous substances appropriately
Of the topics listed above, some are more important than others depending on what services your firm delivers and the type of work your employees are required to complete. For example, the use of PPE will be extremely important for some workers, especially those who may be handling hazardous materials or working with chemicals.
When you’re in the cleaning business, it’s highly likely that your employees will come across, and use, dangerous chemicals on a regular basis. As such, training in this area will be essential. Employees should be provided with instructions as to how to use the chemicals and how to ensure they are stored and handled properly. As the employer, you will be responsible for ensuring material safety data sheets (MSDS) are available for every chemical that your staff use and that these are readily accessible. These vital information sheets provide employees with clear instructions about the chemical, the risks associated with using it, and the first aid measures to follow in the event that it is ingested, comes into contact with the skin or eyes, or is inhaled. MSDS sheets are widely available for the most common chemicals from the MSDS website (www.MSDS.com). To access the sheets, you will need to create an account and will only be provided with five free sheets. Beyond that, you will need to pay $39.95 for a full account, which will allow you to download as many safety sheets as you require. Alternatively, check the chemical manufacturer’s website for MSDS sheets or try the distributor from which you purchase the chemicals.
As you will have gathered by this point, there’s a vast amount of jobs to be done, and sometimes it will make more sense to subcontract certain tasks to third parties than it will to take them on for yourself. Situations in which you should consider using the services of a subcontractor are as follows:
- You don’t have the skills required to complete them and/or an appropriate license or qualification (e.g., electricity and plumbing);
- You don’t have the equipment or hiring the tools to perform the job would be almost expensive as hiring a third party;
- It would be unsafe for you at attempt the job yourself;
- It is actually cheaper or more efficient to hire a third party.
Identifying Suitable Contractors
It’s one thing to recognize that you could benefit from the services of a contractor and almost another thing entirely to find the right people. However, in the current economic climate there are a lot of people looking for work. The challenge is finding the best ones. One good website you can use to find reputable contractors at a decent price is: homeadvisor.com.
Before you ask contractors to visit the property, it is always advisable that you get rough quotes from a few contractors in advance. For example, you could ask them the average price of painting a 1500 square foot property. That will give you a good idea of the general cost and will help you narrow would-be contractors to a smaller list before you invite them to visit the property to provide a full quote.
Always try to select one contractor and then have a couple more in reserve in the event the first provider lets you down. Make sure you check that the contractors you intend to use are fully licensed to do the work for which you are recruiting them by contacting the local registrar of contractors.
Before the contractor starts work, you will need to verify their insurance status. Ask them to provide evidence that they have added the name of your organization to the Certificates of Liability and Workers’ Compensation listing. In addition, you will need to have a copy of their W9 forms so that you can issue a 1099 at year end.
In some areas and states, you may to obtain a general contractors’ license to use a contractor. This may depend on year-end or the value of the work to be contracted. An alternative option is to refer the sub-contractor to the asset manager or realtor and arrange it so that they bid for the work directly. In some situations, you may be paid a referral fee of around 10-15% for recommending a contractor who is subsequently chosen for a project.
Unfortunately, despite your best efforts, accidents can happen and, in the event they do, you will need to ensure that you take appropriate action. If an emergency rears its ugly head, the person in charge should dial 911 immediately. If he or she is unsure as to whether the accident constitutes an emergency, it’s far better to call 911 and let the experts provide guidance than it is to put someone’s life at risk. If the accident has only resulted in a minor injury, basic first aid should be administered. Whenever any accident occurs, a full incident report should be completed immediately and kept on file.