Worker going to Contract Worker

mburch

In our GA branch office there is a FT emp. about to retire. The branch manager wants this person to become a contract worker. I realize there may be some issues with this change.

Does anyone have any experience with this type of change and could you please clue me in to possible pitfalls?

Thanks a bunch.

Nat

Will the retiree be doing the same work or be in a consultant type role? There are certain guidelines that you must follow when classifying someone as an independent contractor. You must consider the following:

* The extent of control exercised by the employer over the work performed;
* Is the individual on the employer's payroll or dare they responsible for paying his/her own taxes;
* Who furnishes the equipment, materials and supplies required to perform the work; and
* Who has control over the hours of work.

The IRS also has their own criteria for determining the status of an independent contractor:

* The individual must provide their own office space and owrk outside the company premises;
* The individual must work for more than one company;
* The individual must be paid by the project, not by the hour;
* The individual's work schedule must not be determined by the company;and
* The individual must not rely on the assistance of the company's staff or supplies.

Hope this helps. It's always risky going from an employee to an independent contractor and the burden is on the company to prove they are not an employee. I would have to ask several questions before doing this: 1. If the person is retiring, why do they want to continue to work? 2. What benefit will the continued work be to the company? 3. Can the company meet the definition of an independent contractor with this individual?

Hope this helps.

mburch

Thanks both Nat and Gillian. You make me look smart!

Gillian

The people who will be after your company for failing to pay required payroll taxes will be the IRS and your state tax people, then you aren't paying a host of other required $$, so it isn't wise to have independent contractors performing employee work.

Pork

It would appear to me that what you Branch manager really wants is the long term expertise of the retiree. Why not set this person up as a part-time employee; still go through the retiree stage and the party, but on your payroll system change the status code to P/T this individual? Let the individual and the employee decide how many hours one will work and for what rate of pay. As long as the P/T work hours does not exceed I believe 16 straight weeks P/T status does not effect anything except the possibilities of being able to withdraw from his/her 401K system. Other benefits could also be effected, but part-time status has helped in the short run. Pork