Mitigate Risks in Hiring Temporary Help
By Robert Fears
R
ANCHERS COMMONLY HIRE TEMPORARY HELP FOR LABOR- intensive tasks such as baling hay, building fence and working cattle. There is always the
tendency to hire people with a handshake and pay them in cash after the work is completed, without creating any signed documents. Yielding to this tendency cre- ates serious legal and fi nancial risks. To mitigate risks in hiring temporary help, several questions need to be correctly answered.
Contractor or employee? “The fi rst decision is to decide whether the tempo-
rary help will be a contractor (self-employed) or an employee,” says Dale Ross, certifi ed public accountant in Georgetown. “It’s all about control. Do you control what the worker does and how they do it and when? Do you tell them when to start work and when they can stop? If the answer to any of these questions is yes, your worker is an employee, not a private contractor.” “Another deciding factor is whether the temporary
help furnish their equipment or whether they use ranch equipment,” explains Kent Schuster, an attorney in Hearne and Austin. “If you hire someone to bale your hay with their equipment, they are a contractor. If they use your equipment, they are an employee. “Other comparisons between contractors and em-
ployees have been made by the Texas Workforce Com- mission,” Schuster continues. “An employee may be required to submit regular oral or written reports about work in progress, whereas a contractor is not usually
42 The Cattleman September 2013
required to do so. Employers typically pay employees in regular amounts at stated intervals, such as every week, bi-weekly or monthly. An independent contrac- tor is normally paid by the job. “Services of an employee must be rendered per-
sonally and they do not hire their own substitutes or delegates to do the work for them,” says Schuster. “A true independent contractor is able to assign another person to complete the job. An employee ordinarily works for one employer at a time and may be prohib- ited from joining a competitor. Independent contrac- tors often work for more than one client at the same time. An independent contractor may advertise, carry business cards, hang a sign in front of their business location or hold a separate business license. The em- ployee does not make his or her services available to the public except through the employer’s operation.” “At the time a self-employed person is hired, it is
very important to have them complete an Internal Revenue Service (IRS) Form W-9 before any money is paid,” cautions Ross. “Once you pay them, it becomes almost impossible to get a completed W-9. When the contractor earns a total of $600 or more during the year, you are required to fi le Form 1099-MISC with the IRS and issue a copy to the people who did the work. The employer does not collect or pay any taxes on contrac- tor services. The contractor is responsible for paying all taxes due on his or her income. “If the person works as an employee, the employer must deduct federal withholding, Social Security and
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