Is your spa using independent contractors to perform beauty services? If so, is this really the best decision for your business? There are both legal and operational issues to consider.
During our recent webinar on spa compensation, many questions were raised by spas regarding the use and payment of, independent contractors. There are certainly times when using an independent contractor makes sense in a spa, but just to be clear, they’re very rare! The ultimate arbiter of the relationship between a spa and its therapists is the IRS, and they supply guidelines on their website to determine the nature of that relationship. These guidelines give detail on the nature of the connection in three different areas:
• How much detail is the person given about how to do their work? For instance, are there service protocols?
• Will this person be evaluated on their performance?
• Is training supplied by the company? All of these would indicate an employer-employee relationship.
• Does the person make an investment in the business? Do they stand to make a profit or incur loss depending on how the business goes?
• Is a regular payment situation, such as an hourly wage typical of employees?
• Does the service provider make their services available to the market or the general public? Do they have a storefront, business cards, etc.?
Type of Relationship
• Is there permanence to the relationship? Is it expected to continue indefinitely, or is it for a specific period of time?
• Is the service provided a key aspect of the business? That would certainly be the case if a service provider was performing treatments at a spa.
• Despite the fact that the business may have a signed contract stating the person is an independent contractor, that does not make it so. The government will take all of these other factors into account.
Beyond the laws and regulations concerning the relationship, spa employers must consider the overall impact on the business of attempting to staff with independent contractors. If they are, in fact, contractors, they won’t attend your monthly staff meetings, and therefore won’t share the vision and culture of the workplace. They won’t receive training when employees do. They can’t be directed as to how they do their work, meaning you have less control of what goes on in the treatment room, behind closed doors. Yes, you are saving your 7.65% of wages contribution to FICA on the behalf of this person, but you are putting your brand identity and quality control at risk. This is worth immeasurably more than your employer FICA contribution. Look carefully at the big picture so you can have confidence that your method is the best for everyone involved.
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