Suggestions for Writing a Contractual Agreement with an employer or Independent Contractor
Having a contract with your employer or independent contractor is a necessary business procedure. You may think you don’t need one, but often times find out the hard way that you do. Planning ahead can reduce the stress and build better business relationships.
- 1. Consult a legal professional to make sure all issues are covered and the financial agreements are favorable
- These are only suggestions. The agreement can be anything you really want, keeping in mind that it remains a win/win situation and both parties are willing to work together.
- . Even if you are going into business with a friend or someone who you highly respect, it is still necessary to spell things out so neither party is taken advantage of if things go wrong or the situation changes.
- Clarify the work situation. Are you an employee or sub-contractor. See guidelines and the IRS website for more information. Outline duties and responsibilities of each party. Will you answer phones or do filing or make phone calls when not busy?
- What is each party responsible for? Be exact so there is no room for confusion. Supplies, Billing, Marketing, advertising, collecting fees, linens, oil, massage table, utilities, bottled water and any other business related article or activity. Work hours, vacation times, sick days, back-up personnel, cancellation policies must be predetermined.
- What hours do they work or what hours do they have available for their use? How are appointments made? ( a central booking person or does each person have their own phone/phone line). How does one know when they have an appointment? Are they supposed to come in when they don’t have an appointment? What is the rate of pay and pay schedule? What other benefits are involved for an employee? sick pay, vacation pay, retirement, health care?
- What insurance is needed for liability coverage (practitioner and premise) and property loss or damage? Disability or workman’s compensation? Who is responsible for paying the fees for insurance?
- Watch for non-compete clauses that will determine where you can practice if you leave the office for any reason. You may not be allowed to take clients with you within a certain mileage range of the office for a certain amount of time.
- What marketing/advertising will you do to provide clients for the employee/subcontractor? What will the employee/sub-contractor be responsible for?
- If insurance billing is involved – who does that and on what timetable? Monthly, weekly, bi-weekly, mid-month, end of month?
- What financial motivations will be involved? Raises, bonuses for having so many clients? bonuses for have a client become a repeat customer?
- What happens when one party wants to get out of the agreement? You can sometimes make an agreement as to who will be responsible for getting a replacement
- How long will the contract be for? Will there be a trial period like 3-6 months where both parties can end the contract if they are not happy with the provisions or situation?
- Is there a renewal date? Is there an option for renewal?
- There are standard lease forms available at office supply stores that can be used if you are self employed and just leasing office space. You can make additions and set financial responsibilities and have them signed and notarized just like any other contract
Employees vs. Sub-contractors.
NOTE: Contact an Attorney to help you determine your Status as an employee or a subcontractor! This is very critical!
There is also a lot of confusion about whether or not you will be an
employee or a sub-contractor. I have seen many people hired as sub-contractors who should have been hired as employees. Learn the basics about whether or not you are an employee or sub-contractor. You can get some ideas from the IRS website http://www.irs.gov/businesses/small/article/0,,id=115045,00.html or
Fill out this Form with the IRS to determine your status but check with an attorney first and ask if you should fill out the form!
IRS SS-8 www.irs.gov/pub/irs-pdf/fss8.pdf
“The general rule is that an individual is an independent contractor if you (the person for whom the services are performed) have the right to control or direct only the result of the work, and not what will be done and how it will be done or method of accomplishing the result.” From the IRS Website listed above
Many employers (office owners) may want you to be a sub-contractor so they don’t have to pay the extra fees involved in hiring an employee like the unemployment fees and social security taxes and health care benefits.
As a sub-contractor, you are self-employed. You just pay a flat fee or a percentage of your income to the business owner. The business owner takes the risk of signing a lease or buying the property and setting up the business. You may or may not have a furnished room. You will most likely have to do all of your own marketing and business building. You will be required to pay your own taxes, licensing and other expenses. Beware of new franchises or operations that will only pay you $12-$15 per hour as a sub-contractor. Figure out what your other expenses are and deduct that from your hourly pay. Read the fine print in the contract!
If you have any questions about whether or not you will be an employee or a sub-contractor, please consult an attorney. Many massage therapists should be classified as an employee and are being taken advantage of.