12 Mar Is Your Virtual Assistant an Employee or Independent Contractor? **Attorney Advertising**
As you grow your company and expand your team, you may find the prospect of hiring “virtual” employees to be an attractive and flexible option.
For starters, having remote team members can save thousands, if not hundreds of thousands of dollars per year in overhead expenses. Here we use a virtual receptionist team to answer our calls during business hours, handle some outgoing calls, and take care of scheduling tasks. They do an outstanding job at a very reasonable cost since they work remotely and are employed by a separate company., Instead of purchasing or leasing office space or expanding current operations to accommodate new team members at potentially expensive rates, we informed a company of our needs, and they in turn train, manage, and pay their employees to handle our work as we have instructed.
Hiring virtual team members can save you significantly in taxes and insurance, too. Most virtual assistants are independent contractors, or an independent business that pays their own taxes, provides their own health care, and has a staff that they hire, train, and manage. When you engage a virtual assistant, you are, in fact, technically their “client,” so you won’t have to worry about payroll taxes, insurance premiums, and other headaches. You are responsible, however, to issue a 1099 by January 31st to any independent contractor to whom you paid at least $600 in the previous calendar year.
Here’s the catch though: just because someone works “remotely” outside of your office, doesn’t automatically make him or her an independent contractor.
The classification of independent contractor vs. employee matters greatly, and you need to be careful to ensure you are not blurring the lines. If you do, you could be held liable for a whole host of taxes, benefits, and fees, including:
- Unemployment taxes
- Payroll withholding
- Social Security and Medicare
- Minimum Wage and Overtime
- Retirement Benefits
- Health and safety requirements
- FMLA, Worker’s Compensation, and Unemployment Insurance
- …and more.
If you are considering hiring virtual team members, I suggest that you talk with an employment attorney to ensure that he or she will truly be considered an independent contractor for your company. You will also need to research the laws of your state and the laws of the state where your virtual assistant resides, as it could impact his or her classification (e.g. California is a state that presumes a virtual assistant is an employee – NOT an independent contractor– unless you can prove otherwise).
Your attorney will also alert you to any warning signs that could cause your virtual arrangement to come back to bite you later. Such red flags might include:
- The fact that you are the person’s only client. If you are the only person your VA is working with, it’s not likely that he or she is operating a real business and therefore not acting as an independent contractor.
- If your work expectations for that person blur the lines between employee and contractor. Essentially, the more “control” you have over the person (the hours they work, the resources he or she uses, the level of supervision you require, the specific tasks managed), the more likely that person can fall into an “employee” category.
- Your pay arrangements. Is the person invoicing you for their services? Do they have an opportunity to make a profit or loss? Or are you paying an hourly fee for specific tasks as you would any other employee in your office? The way you pay your VA matters and needs to be carefully considered to avoid problems down the road.
A proper agreement is also important to have in place that outlines your professional relationship in the event you face legal challenges in the future. Again, the stakes are too high to take chances. Even if you are incorporated, you could be held personally liable for the fees and back taxes mentioned earlier. Imagine having to liquidate your savings account to cover years of unpaid overtime when your virtual assistant sues you claiming to be an “employee” who’s entitled to it. It happens more frequently than you think.
Another important consideration when you are working with an independent contractor is that you must make sure that you own any intellectual property that they create. Just because you pay an independent contractor does not automatically mean that you own the work created for your business. Your agreements must provide that it is work-for-hire and anything created for your business is assigned to your business at the moment of creation.
Take the time to work with an attorney to craft a proper agreement so that you are protected from the start. If you are thinking about hiring a virtual assistant and have questions or need help ensuring that you own the intellectual property that an independent contractor creates, we invite you to contact our business and intellectual property attorneys at 888-666-0062 to schedule a consultation.
DISCLAIMER: The information contained in this article is for informational purposes only and is not legal advice or a substitute for obtaining legal advice from an attorney.
Law Office of Jason H. Rosenblum, PLLC © 2018 All rights reserved.