Written by Lisa Porro, PHR – CA HR Consultant; 7/22/16
Engaging an independent contractor to supplement your work force – a true independent contractor – can have a lot of advantages. For a special project or periodic consulting, it is a way to hire a professional without the necessary paperwork and onboarding period required to hire a full-blown employee.
The IRS is very specific about who falls under the independent contractor category – namely that he or she should have the majority of control over the how, when and where the work is completed and not the employer – and if you find that your contractor may, in fact, be an employee, or would like to convert the person to full time, there are a few steps to follow:
- Define the job: If the former contractor is amenable to full time employment, a job description is a must. It should contain information regarding the job title, reporting manager, and the FLSA classification (exempt or non-exempt) as well as the duties this person would be performing as an employee.
- Determine the pay: Be ready to negotiate. The contractor, responsible for his or her own employment taxes and benefit costs, builds those items into the rate charged to clients and is more than likely expecting a very different number than you are prepared to pay as a direct employer. You will need to determine a fair salary based on the market pay range for the position as well as the experience and expertise the contractor is bringing to the table.
- Communicate expectations – Before the offer is signed. One reason independent contractors may have gone into business for themselves is that they enjoyed the flexibility and autonomy in hours and work assignments. Will they now need to clock in and out on the company timekeeping system? Work a specific schedule and/or ask permission prior to working overtime? Relaying and discussing expectations proactively will help avoid possible misunderstandings about how their role and responsibilities will change once they are hired.
- Stay consistent with new hire processing. Even if the contractor has worked with you for several months or more, it is still advisable to follow all procedures when bringing the new employee on board. Collect a resume and application for the file and run a background check if you do it for all new hires, as well as all paperwork with a signed offer letter, including an I-9 and W-4. And while the former contractor may be quite familiar with the work they will be doing, allowing them an introductory period similar to what you offer all other new employees will provide time to adjust to and absorb what they need to about their new role.
- Welcome them into the fold. Many contractors are in and out of their clients’ offices quickly and don’t have time to develop working relationships with the employees onsite. Don’t assume that since they have been there for a few months that they already know everyone. A welcome lunch or mid-morning office coffee break will help break the ice.
Prepare for wrinkles – Going from 1099 free agent to W2 employee may take some time to get used to for some long-time contractors. A contractor-turned-employee may have trouble adhering to a rigid schedule, forget about formally requesting PTO or take a longer lunch than is usually “acceptable.” Regular communication and a bit of patience will be key in helping them through the transition!