Show notes
If you are interested in building a team, or have already hired a team member or two - THIS IS THE MOST IMPORTANT HIRING PODCAST EPISODE YOU SHOULD LISTEN TO!!!
What's the difference between a W-2 employee and a 1099 independent contractor - and why do you need to know the difference? Well for one, if you've already hired 1099 contractors, but you're treating them like employees - then you've misclassified them.
How do you know if you've misclassified your new hire? In today's episode, I'm going over several ways to know if someone is misclassified - but here's a quick preview…
Here's the most common ways you'll know if you've misclassified a team member as a 1099 when they should legally be a W-2:
1). CLIENTELE: a 1099 is self employed and they are their own business. Therefore any clients they provide services on are THEIRS. So if they want to contact them, schedule them at a different time, charge them whatever they want to charge them AND take them at a different location - a 1099 CAN.
If you're not cool with that - then you actually need to have them be W-2 employees so the clients are property and an asset of YOUR business and therefore cannot be contacted or solicited by your service provider to receive services anywhere else without consequences.
2). SUPPLIES and TRAINING: If you provide supplies, materials, booking software, and train your "team member" to do the services in a certain way, then they're most likely a W-2 employee and not a 1099. Imagine if your landlord came into your business and tried to tell you your isolation sucks and you need to work on your stickies cause the clients are unhappy...you would laugh at them and tell them where they can go!
You have the same amount of control over the results produced by a 1099 as your landlord has over your business. If you want any control over the results and the experience of the clients - you need W-2s, not 1099s.
3). PAY STRUCTURE: If you pay your 1099 with any sort of regularity (weekly, monthly) and they are paid per hour or as a part of "payroll", then they are definitely not a 1099. Think of hiring a Plumber to come in and fix a toilet. You're not paying the Plumber a commission per toilet fixed or based on how many hours he took to fix the toilet - you're paying him for doing the job of fixing the toilet.
That is an INDEPENDENT contract based job. Most beauty biz owners I talk to who have 1099s don't even have a CONTRACT in place for any employment classification - so how can someone be an independent contractor without a contract?
Episode Highlights:
- [5:37] How does the IRS get involved in your employment structure?
- [8:53] How much control do you have over your 1099 independent contractors?
- [17:18] You need ATTORNEY-created contracts - those online templates will not hold up in court.
- [23:47] When you're trying to legally classify somebody you cannot compare the pay structure that you're trying to give an employee to the same as what independent contractors and illegally misclassified businesses do at 50% commission - which runs rampant in our industry.
- [25:24] If you decide to continue to cut corners and do things illegally, you're essentially putting the fate of your business in the hands of someone else - because you "trust" that no employee will ever think about reporting you.
Ready to hire your first (or next) team member? Maybe you've already hired but this episode has got your wheels turning about some changes you need to make ASAP! Hit me up in the DMs over on Instagram with the message #hire and let's chat!
Disclaimer: The Lashpreneur LLC is not a licensed tax, legal or investment professional. The information contained in this site and episode are provided for informational purposes only, and should not be construed as legal advice on any subject matter.
You should not act or refrain from acting on the basis of any content included in this site or episode without seeking legal or other professional advice. The contents of this site contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site or episode.
Our TOPPODCAST Picks 
Stay Connected
