This article first appeared on lauraleecreative.com.
As entrepreneurs, there’s something about the extreme independence of owning a business that we all love. The business’ success and failure are all on us- and we love that thrill and the grit it takes to get the job done.
But at the same time…at some point, we all discover that we do in fact have limits. And at some point, we reach the point of diminishing returns, where we just can’t get everything done on our own. When we discover those limits, we’re faced with the question: do we outsource, or just keep trying to do it alone?
Friend, hire that VA. Stat.
Many of my clients who hesitate to outsource their work are nervous of the unknown, and I completely understand. After all, I’d much rather you do your due diligence before you enter any sort of business relationship! But, let’s clarify the unknown, shall we?
Contractor vs. Employee
- The first thing to understand is the difference between contractors and employees- this is the most common mistake I see my clients make.
- How are contractors and employees different, and why should you care? Well, mostly because the IRS cares, and with the increasing number of entrepreneurs, they now care a lot. If your hire is an employee, you must adhere to overtime, minimum wage, and tax laws (8% of their salary) for that person. If you accidentally misclassify your employee as an independent contractor, you could be liable for wages, back pay, unpaid overtime, and possibly court costs and attorney’s fees. More importantly, misclassification means you’re susceptible to enhanced scrutinization by the government going forward.
- Although there are several factors, the major difference between an independent contractor and an employee is the type and degree of control that the employer has over the worker. Employers determine when, what, where, and how the employee will perform the assignment. On the other hand, an independent contractor is just given an assignment, with little to no control over when or how the task gets done. Normally, the independent contractor will have an end date to their services. While the employer has the right to control the outcome or product, they generally don’t have a say about how the VA goes about completing the assignment.
6 FACTORS DISTINGUISH INDEPENDENT CONTRACTORS FROM EMPLOYEES
The difference between independent contractors and employees comes down to the degree of “control” you have over the hire. “Control” is defined by certain factors:
- How integral is the hire to your business? For example, my VA isn’t playing a central role to your core business of providing my legal services for clients, and I can still provide my services absent her help (just a lot less sleep).
- Whether the worker’s managerial skills affect his or her opportunity for profit or loss. I.e., do you set their hours? Can they pursue other jobs?
- Permanency of the relationship. If you have a defined end date to their services, they are probably an independent contractor.
- Nature and degree of control over their work. This is arguably the most important factor, and many elements can factor into the decision. See more here.
- The relative investments in facilities and equipment by the worker and the employer. Have you provided the tools for the hire to do their job, such as giving them a computer to use? If so, they’re probably an employee.
- The worker’s skills and initiative. Is the employee still free to pursue work from other employers?
By far and away, the most effective way to maintain your hire’s status as an independent contractor is to have the right agreement in place.
What needs to be included in your contract?
- The Independent Contractor contract (and a Virtual Assistant agreement, in particular), must contain very specific provisions that protect each party.
- The Virtual Assistant relationship raises some unique issues in the world of employment law. For example, who owns the work that’s created? Is the hire required to log their hours? What if the relationship ends poorly, and the VA locks the employer out of their accounts (yes, this has actually happened to a client of mine)? What do you do about rollover hours after the month? There are a plethora of specific provisions that an experienced contractor employment attorney will look for in your agreement- and I’ve broken them all down for you here.
- When it comes to potential issues with a VA, the vast majority of issues are the result of poor communication. I won’t hide my bias: your contract is the single most important piece of protection you can have for your business. Not only will your contract allow you to clarify all of your potential miscommunication issues with your VA, but it will also protect you from the horror story scenarios we’ve all heard about.
GENERALLY SPEAKING, YOU NOW KNOW HOW TO (LEGALLY) HIRE A VA…. BUT WHAT ARE THE FIRST STEPS YOU NEED TO TAKE?
Conduct an interview.
Have a brief interview with your potential VA and make sure that your personalities will be able to work together well. It may not seem like that big of a deal since you will be working remotely, but you will be relying on this person to help you with something precious- your business! It’s critical that you take the time to discuss the general subject matter of what you will want the VA to do. The root of almost every soured business relationship that I see is the result of poor communication, so lay a sound foundation. This will be a great opportunity for you to flush out any potential miscommunications at the outset, which is essential for any business relationship.
Send them a contract.
Once you’ve sufficiently communicated the job to your potential VA, send them your contract (or vice versa). Make sure that the contract passes the test I mentioned above, and make sure you both are completely clear as to what the agreement says. Sign on the dotted line, and get to work!
Send them a W-9.
Save yourself a headache next January, and go ahead and send them a W-9. If you’ll be paying them more than $600 in a calendar year, you’ll need to have them sign a 1099 by January 31 of the next year. Mark that on your calendar now, so you don’t forget.
As you can see, your VA contract must include a plethora of information- and please note, this is not intended to be a complete list. To find ready-to-use templates that I use with my own VA in my business, head to www.shopcreativelaw.com!