I’ve been breaking down the three types of workers that you’ll want to consider for your catering business: interns, contractors, and employees. In this second part in the series, we’re talking about contractors!
It’s not unusual to create a staffing plan based on what worked at your previous job, or what you’ve seen your peers do. The danger in this is that we’re often replicating the same mistakes as others. I’ve seen far too many people staff their catering businesses with freelancers when these individuals should be considered employees. This can get you into some dangerous waters with the IRS.
Freelancers, casual help, assistants?
Call them what you want… these are all Independent Contractors. IRS has defined the rules for them. The definition can be gray, the most significant factor is that a contractor needs to have their relationship with your business independence.
A contractor should come to the table with the expertise to provide your company with a short-term solution to a company need. In catering, you might hire a chef to jump in for six months if your head chef is out on maternity leave. Alternatively, you may work with a temp agency to employ front-of-house staff.
Independent contractors don’t work for you.
An independent contractor works for themselves, not you, and that is important to remember. This distinction is important to remember because many employers want loyalty and control over their staff. he reality is that when you hire a contractor, you are hiring them as an independent service provider. You are their client. Also, it’s vital that you define the terms of the service they will provide in an agreement.
Because they are typically hired as an expert with a particular skill set, they are legally allowed to work for various companies (even competitors) in your industry. The relationship with a contractor is, by nature, limited to a contractually defined period of time. The IRS doesn’t have a hard-and-fast checklist of IC qualifiers. But, you’ll want to show a trail of autonomy between the two of you.
Also, while you don’t have to pay any of their taxes, the contractor is responsible for paying all of their taxes (which makes it costlier for them). You are, however, required to provide them with a 1099 form annually if they provide more than $600 worth of services.
Can ICs become employees?
Yes, definitely! A contractor can come in for a short period of time. And, as the work becomes more involved and more integrated, it may become apparent to both parties that the relationship is becoming more like that of an employer-employee. You may have more and more work for them or depend on each other more, and they have become a necessary part of your operations. This is when you want to transition your IC to employee status. You would need to onboard them just as you would a regular employee.
Where do I find contractors?
This is where you have to be very specific about what you need. If you need social media assistance, you likely want to hire a social media expert to help you execute on your marketing goals. Strong service-providers like this will typically come from asking around through word of mouth: “Do you know any social media mavens? What about a strong bookkeeper?” For specialized skills in catering and hospitality, you may want to work with a temp agency to help fill in your staffing needs.
You may also find that some of your industry friendors (especially if they are new) are eager and willing to jump in to help on an as-needed basis for a little extra cash and some additional experience. That wedding planner who does a great job executing events, who is new-ish and doesn’t have their calendar full, may be interested in helping your run your front-of-house management during your busy holiday season (which may be their slow season).
When is it best to hire an independent contractor?
If you have a temporary service that you need help with, you’ll want to consider an independent contractor. You don’t mind that they are doing that same job for many other catering companies, or even their own catering business. A lot of your specialized office jobs might come from a contractor. (Think: bookkeeping, graphic design, web design, virtual assistance.) You’ll want to bring in a contractor when you want someone who is an expert in the area that you don’t need to train. They can jump right in to do the job.
