*
As an independant contractor, Self-employment tax (FICA by another name)runs about 14% of your net income. You can deduct your expenses and tools but big power tools have to be depreciated and if your state tax laws are not the same as the federal ones this can quickly become a paperwork nightmare that you will gladly pay an accountant to solve. If you are not planning to have a lot of work as an independant contractor after this job is over, I would suggest opting for the employee status. Also, GOD forbid something goes wrong, but if you don’t have good insurance, you might miss that Workman’s comp. And if a client sues, you may be bit more protected as an employee than as an independant contractor.
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
The FHB Podcast crew takes a closer look at an interesting roof.
Featured Video
Highlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
*
As an independant contractor, Self-employment tax (FICA by another name)runs about 14% of your net income. You can deduct your expenses and tools but big power tools have to be depreciated and if your state tax laws are not the same as the federal ones this can quickly become a paperwork nightmare that you will gladly pay an accountant to solve. If you are not planning to have a lot of work as an independant contractor after this job is over, I would suggest opting for the employee status. Also, GOD forbid something goes wrong, but if you don't have good insurance, you might miss that Workman's comp. And if a client sues, you may be bit more protected as an employee than as an independant contractor.
*
This guy is trying to stick you. If you are an independant contractor you should be billing him at about 35.00 per hour. You will be responsible for your fica, filing quarterly reports,ect. Also you cannot go to the labor board in your area if he stiffs you. You will be saving him about 30 to 40% on your salary. This is the typical labor burden. and giving up a lot of rights. Is this the kind of person you want to work for?
Rick Tuk
*yup, you are on your way to being screwed, I just got out of a similar situation and even though I took the 20 an hour I still got screwed. luckily the job didn't last that long, but I still feel like I lost a fair amount of money working for this guy. Skip is correct 35.00 an hour is the going rate and if he bitche's about workers comp certificate that he needs for his records tell him to take 10% off of the total and raise your rate 2 dollars an hour.
*Alan,dito on the information you've recieved. I'll cost him more to pay you $18.75 than $20.00 under the table. Taxes, insurance, and workmen compt. add up to more than $1.25 per hour. But, as Crawldaddy suggest and charge as an independent contractor, than you have to except the respon-ablities of one. That would mean a workmen compt certificate if he ask for one. If by chance you got hurt, and it's your fault,you could go after him to pay your medical expences, when as a independent contractor you supposedly taking care of your self. Sliding in the back door like that puts you in the same league as the guy who's offer semms "shakey"
*Here in Washington what he proposes is illegal unless you are liscenced and bonded. Even then, there are limits to what % of your work can be with one GC. Check with your State Dept. of Labor + Industries. In the early 80s I worked for a GC who eventually went to jail over this type of stuff. The first time he got caught paying us less than prevailing wage on a military base job, they made him pay the back pay. The SOB gave us two checks - one for 10% of the back pay (that we were told was for us) the other for 90% of the back pay (which we were told to give back). Some guys were owed thousands of dollars. I got pissed off and quit right after that, but it wasn't long before he got busted for that, too, and went to jail. There are laws protecting the working man/woman, but you can't lie down and let anyone step on you either. - jb
*
Call the IRS? Not a good idea. Do what you want with a guy, but keep the godforsaken IRS out of it.
Dog
*
Hi Steve.
In 1983, I moved from San Francisco to San Diego. My woodshop was on Mississippi Street, Potrero Hill area. In those days $20-30 hour was the going rate.
When I moved to San Diego, 1983, I found skilled carpenters getting $5-8 hour, with all their tools. So, I did plumbing for $15 hour, until an ad in the paper came out saying finish carpenters wanted $20.99 hour.
The job was at the Mariner's Cove Apartment Complex. It was an $18 million, 500 unit, HUD Section 8 low income housing project, so Davis-Bacon prevailing wages were supposed to be paid.
Well, as it turned out, my employer was the low bidder. He had all kinds of methods for paying. And my $20.99 hour never seemed to materialize, even though all the signs indicated thats what we were supposed to be getting.
I kept track of my time and efforts, and made claim for backwages, which I received on 12-15-83.
Right after that, the guys on the job said that because I got that $8000 in backwages, there wasnt enough in the boss's bank account to pay them. And they were going to have a crummy Christmas because of me. I told them there were bonds on that job, their money was guaranteed by HUD, and I would help them.
So, I helped them. There was 22 of us at the Mariner's Cove Apartments. About 8 of us were under our one employer. The others were for the other subs.
All 8 of us went around downtown to all the Federal Buildings we thought would help. Each Federal Agency sent us to another Federal Agency. We were always getting pushed aside.
Then we went to Congressman Duncan Hunter's Office. And things started to happen. But we were trying to get the guys paid. So, the news was next.
Rory Divine, Channel 39 News came to my house to interview me, with all my law books and records. Then she went to Congressman Hunter's Office to interview the aide, who said the problem of Davis-Bacon underpayment of wages was significant. And then Rory Divine said this, or something close to this..."perhaps these claims have become so significant because of a US Attorney's Office that is reluctant to file criminal charges in these matters"...
And so, the US Attorney's Office filed charges against my employer and about 10 others. The investigation was done and it was reported that 1280 workers were found due $1.7 million in backwages. And a lot of people from HUD got fired. And, on 4-15-85, my employer was sentenced for filing false document.
Immediately after that, the government reprisals started against me. Of course, there was blacklisting before that. You know, having your name blasted throughout the news just tells the contractors who dont pay properly not to hire you. And at that time, in that city, it was most of them.
So, the first government reprisal was a summons for 18 months of Federal Grand Jury service. (How many carpenters are doing that?)
And the rest followed. And every time they did something to me, I saved the evidence and filed a claim in the proper court. And every time I filed a claim in the court, the court would ignore it, and force me through some other hoops in this system of theirs.
At the end of my 13 years fighting the corruption in government that I was documenting, I have about 30 claims all consolidated to case #95-2437 KEEP, San Diego Federal Court. Most of all the other Federal Judges recused, so Chief Judge Keep got the case. But she has ignored it.
In the beginning, I used to get threatening calls from the Governor's Office. After threatening to manipulate the justice system against me, I went to the FBI. They said that I did not want the bullshit hanging over my head for the rest of my life so I should fight. So I did.
And now, I have shared a little bit of my experience on this board.
There is much more to building than pounding nails. Sometimes it is better to seek first doing good in one's work, knowing that rest will be added unto.
Hope this helps.
Hi jim "crazy legs" blodgett,
Your message about prevailing wages reminded me of the above post, which comes from 1-31-99, entitled "What do carpenters get paid in your area".
I think you will find it interesting.
*Hi alan samson. That is a chilling post, for sure. I am thinkin' you are warning me, in a kind way. If they want to step on me, they are gonna have to knock me down and do it quick, before I roll over and jump back up, 'cause I ain't layin' down for them, or anyone else. Thanks though - jb
*Hi jim "crazy legs" blodgett.The thought of warning you never occurred to me.I dont see how my telling that story might be a warning to anyone.Simply it is a true story about what happened to me when I did not keep quiet about workers being cheated out of Davis-Bacon prevailing wages.In my case, Governor Deukmejian's Office Aide threatened to manipulate the justice system against me, and I documented evidence that such occurred.The Ninth Circuit Court of Appeals denied mandamus on two occasions, giving those corrupt government officials free rein to abuse me as they so wished.The prevailing wage issue is a very political one. All one has to do is listen, to know that there exists some who would do away with all worker rights.These same people seem to hate anything or anyone who might stand in the way they wish to profit, whether that be by cheating the customer or by cheating the worker.This is nothing new. They have been with us always. I hear all the time about the frivolous cases clogging the courts, doesnt everyone? But I know that the only people saying that are those who despise people and the rights they are afforded. I dont think anything I have to say could be a warning.There were others that wrote on that post from 1-31-99. You may want to check it out.Hope this helps.
*I've not had the problems like what has been posted luckily, but as a builder who now has his own company, I can tell you that there is no way that I would pay someone under the table. My labor burder is running about 25% of my payroll. For those considering being an independent contractor, take this into consideration. In Oklahoma the following percentages apply: (figure a carpenter getting $25.00 hr - $1,000.00 a week)$ 1,000.00 gross pay 8.00 fed unemployment 14.50 medicare - company 62.00 SS - company matching 1.00 state unemployment 146.40 workers comp 26.80 liability insurance -------$ 1,258.70 Total company cost - 1 employee, 1 weeks salaryThat figure doesn't include time, salary, etc necessary to keep track of, figure deductions, writing of paychecks, filing of monthly forms & penalties if you are 1 day late filing the forms with the feds & state.I'm getting ready to check out a company (I'll call it AHR) that a friend (I'll call him Bill) recommended (he is using them now). Basicly, Bill owns his own company, does the hiring/firing, etc., but all his employees are technically "temps" of AHR. Bill reports when he hires someone, has all the forms AHR gave him (withholding, applications, etc), tells them how much he is paying the new "temp", reports their time for the week, etc. AHR does the payroll, cuts the checks, and then sends Bill a total bill for that pay period. Since AHR has such a big payroll, they have their own WC coverage, liability insurance, etc, they can provide it at a lower rate than Bill can. AHR also offers their "temps" additional benefits - medical, life, disability, etc at lower rates due to their volume and group rates. The cost to Bill for their services is 5% of the gross salary and is actually lower overall because of the difference in price between what he was paying for WC & liabiality and what he is being charged by AHR. in addition, Bill doesn't have to spend the time to do all the paperwork.As soon as I find out more, I put a posting up.Vince
*Vince,if you get more info I would like to hear about it myself.I have been looking into that very same thing and my understanding is similar.Much like a regular payroll service with a few addditional benefits.For me ,it was gonna cost about $12 a week for 1 employee. There are a couple of additional nominal fees several times a year for additional paperwork which the service must file with the tax authorities.It seems a very viable option for a 1 or 2 employee operation.good Luck,stephen
*a quick post to give an apologee to Rick for mixin him up with Skip on my previous post. I was just rereading this post when I realized my mistake, I suppose one of these days I will get my head out of my ass, probably when things slow down. Sorry Rick. Alan I still get chilled to the bone when I read your story about that HUD deal.
*
Guys, etc.
I too, am looking into this temp thing. A friend who uses one says that his temp company also provides a 401k matching up to $1,000 at no extra charge. How do they DO that? Ralph
*
Volume.
Rich Beckman
*Hi Vince.That is compelling information that you posted.I, too, would be interested in hearing more.I have a question about it, though.Check out my reasoning, as follows: (see if you agree)When I used temp guys for misc work on Sally's house, the dispatcher would come and look at the work. He told me that each job had a different workman's comp rate. Needless to say, I ended up doing the roofing by myself and the lower work went to the temps.So, if that was typical of what temp agencies are supposed to do, and I dont know, but if it is...Then it seems to follow that the temp agencies described above may not be making the same distinctions, so as to keep the lower rate.This seems like a gamble to me. I dont know the laws about this, but it would seem likely that the one who contracts with the temp agency who is not taking out the proper rate for workmans comp is vulnerable for a cost difference later, if there is a problem.Is my concern meritorious here?Hope this helps.
*That seems like a valid question.
*I don't have all the ends & outs yet, been working on an estimate for a big Church remodel, but to my understanding, this is not a "temp" service that you call & tell them what kind of "manpower" you need. It is more of a payroll service. My friend Bill hires & fires as he needs. The only thing is that he is basicly hiring & firing for the company. Yes, they can supply manpower if you need someone (not a 1 day job). His "employees" now list AHR as their employer and he sub contracts from AHR, but at the rate he pays plus the normal labor burden (WC & liability is less since they deal in volume) plus a small fee (about 5% of their salaries). This fee, when totaled with salary & labor burden is less than what he was paying when they were his employees. That added to the fact that he did not have to worry about all those monthly, quarterly & yearly filing deadlines & penalties for late filing convinced him. As for the different trades & WC, when he faxes the weekly report, he reports who worked how many hours & skills performed. If worker A is listed as a carpenter, performed 30 hrs carpentry & 10 hrs general labor, AHR breaks down those hrs in the appropriate category. Right now, if I had any employees, on my monthly report to the State, I can only list 1 category for each employee. If that employee was a roofer (HIGH WC rates) and for 5 days last month it rained and he stayed in the shop repairing tools, organizing, helping with doing estimates, etc., I could not list 40 hrs as general labor (lower WC rates) & 120 hrs as a roofer. It would all have to be listed as roofer at the higher rate.Since Bill is a small contractor & sometimes has "slow" periods, he needs to reduce his overhead. AHR offers an additional feature that is a benefit to the "employee" is that when a particular job is done. AHR offers to keep that "employee" on the books in a non pay status until Bill has another job ready or they will try to help place that "employee" with another company that AHR is "working" with.When I get more information, I'll post an update.Vince
*"Employer Leasing Companies" are real common here in NJ.Usually, these companies lease office staff and professionals to companies. Many existing businesses have fired their staffs who were immediately hired by an ELC and leased back to the original employer. Generally wages stay the same, benefits stay the same or even increase.I didn't know anyone was doing this for labor and trades.
*Wait a minute. I'm a rare visitor from Knots. Do all you guys mean to tell me that there are carpenters earning as much as $20 per hour, and that contract carpenters really charge $35 per hour. That has to be horse manure. Here in Houston, employers might offer $13 to $16 per hour if you're lucky, and very, very fast with it. This beggars belief. Am I in a separate country or something. The rates you folks are all talking about are, well, different.
*Hello Richard, It's nice to have a neigbor visit us once in awhile. I am located just east of you (Beaumont region) and you are correct about the wage scale for caprenters in this area. But...Contract carpenters in our area make $20.00 and up. We do not have a union scale here, and this makes a big difference. In a lot of regions around the country, union scale wages set the wage standard. It doesn't mean that all carpenters earn union scale wages, it just means that the average wages are a bit higher than non-union areas. Independents in the Beaumont region make anywhere from $40.00 hour to $65.00 per hour. Of course their overhead and such must come out of this, but they still charge these types of wages. Independent plumbers here charge $65.00 to $70.00 per hour, Independent Electricians charge $65.00 to $70.00 per hour, Trim Caprenters get about $30.00 per hour, and so on. These are not large companies, with the wages of it's employees hitting these numbers, it is Independent Tradesmen hired by the Contractors or homeowners.Just a little info... James DuHamel
*Sgian - Carpenters here in Western Washington make over 20.00/hr as many hours as they want to work. The last few times I looked in the classifieds they were offering 22.00 or 23.00 for a top hand to start - plus a signing bonus of 500.00. LOTS of work for carpenters/cabinetmakers in these parts. Climate is mild here too, most folks work outdoors year round with no trouble. (Nice piece on the extention table for your sliding table saw in the recent "Woodshop News".) - jb
*Posts 13 & 14 tell me that there are some sharp buggers around. I'm a tad secretive, not that I've anything really to be secretive about, but I haven't fooled these two guys. Thanks "crazy legs" for the compliment. I've seen your posts around before. What can I say?!! You always have a good word to add to a discussion. Perhaps I'd better sod off back to Knots before I get all tired and emotional! (15 pints of beer will do that!) Can I charge $100 per hour for consultation fees? Be brutal if you must. Tell me it should be $500, or something. PS I'm nae a lawyer.James, I'm in the wrong game. I'm just a furniture guy. Can you take carpenters frae Scotland that hibernate from the friggin' heat between the months of March and October, inclusive, and pay just a mere $15 per hour all year round? Sliante, Sgian.
*Sgian - I am sure there are situations where you can charge 100.00/hr consultation fees. At another board one well known carpenter is talking openly about billing 75.00/hr for construction management. With the artistic value of the furniture you get involved with, I think you could probably name your price, but I am just thinkin' out loud here.And I'm not that sharp a sleuth, we have a mutual friend who tipped me to your article. I do like the way you write though, clearly authentic and humble, yet professional and authoritative. Keep at it. - jb
*Hi guys, hi Sgian, the furniture guy I know who specializes in repairing nicks and gouges in fine woodwork and furniture charges $65 per hour. He keeps busy especially with the bigger buildings downtown. The whole conversation of contract labor rates is of extreme interest to me. I've been doing alot of thinking on this subject. I don't know precisely what the market rates in Portland are for carpenters, cabinet builders, tile setters, countertop guys, etc. I am trying to figure it out and noticed that what subs I used charged around $45 an hour with electricains and plumbers charging $65ish. I had no problem raising my commercial rates but haven't even tried raising rates for the few residential clients I still work for @ $25 per hour. JB has allready logged in with his idea that one rate fits all. How about it people, care to discuss this subject in such away as to shed light on market rates for contract work, both residential and commercial? Even if you do it all by bid, perhaps you could hint at what your hourly goals are for income.Joe
*Hello Richard, Actually, I have your web page book marked. You do some remarkable work, and I like looking at it once in a while. It makes me a humble man to see your work, and then look at my designs for a table, entertainment center, etc... I love woodworking, and I thought I was pretty good. Seeing work like yours brings me back down to reality, and humbles me a bit. But then... you ARE a Texan, so that explains why your work is so good. :)James DuHamel
*Okay, I'll give up my secrets. Only in the hopes that I can hear everybody elses too.I work in southern NJ. Rural community, much industry has left area in past 20 years. 20% of population in this county is under the poverty line, twice the national average unemployment. What I'm saying is, this is not a thriving, rich town. I have to cover three counties to keep busy. All work is residential. Additions, garages, basements finished, etc. No K&B.I charge 37.50 per hour. 10% markup on materials and 10% overhead and profit on everything.I think I'm pretty in-line with everyone else in the area.Now, don't be shy...I showed you mine now you show me yours.
*Oh for cryin' out loud! The man obviously succeeds IN SPITE of bein' in that God forsaken place!
*Jim, All kidding aside, i please do not refer to my home as "that God forsaken place". Thanks,James DuHamel
*Thanks Ryan, now as long as we can keep andrew from reporting us to the feds for price fixing and restraint of trade we can all learn a little about market rates. I do believe that residential rates in Portland are higher than the $25 I mentioned. I do anticipate raising them the next time I do more than a couple hour job. Part of my problem is that my residential work is for very established accounts and good friends.JoePS just kidding andrew
*OK James - you know I'm just kiddin' around.But if you lived up here in God's country, where the Douglas Fir forests stretch as far as you can imagine, and you can look East or West in mid August and see snow capped peaks, you would know why we tell everyone it rains all the time here.Truth is, Texas is as nice as anywhere else. There, I admitted it in public...Texas...Canada...Rhode Island...Wisconson...Arkansas...Maine...what the hey, you gotta live somewhere.
*It looks like I started a bit of cultural exchange! James, I'm very flattered. I just do what I do. Can I come back into Breaktime sometime to set off a bit more banter? I can't do much else here because I don't know a sweated joint from a sweaty armpit, nor a roof tile from a night on the tiles!I think I'll confine my techy. input to Knots where I do know one or two answers.
*Hello Jim, I know you are just kidding, but man I hear so many negative remarks about Texas that it starts to get under my skin after awhile. I'd have to say that 90% of all people who bash Texas have never been here, much less lived here. It is a unique place, to say the least. It is full of the most partying people you could imagine. We have a very diversified population, and every one of them have festivals and parties. We have Mexican festivals, Dickens on the Strand (in Galveston), Rice festivals, pecan festivals, Blue Bonnet festivals, Dogwood festivals, tomato festivals, corn festivals, German festivals, Spanish festivals, Asian festivals, white man festivals, etc... The festivals all run pretty much back to back (all across the state). They start the first ones in January, and the last ones end in December. Partying all year long. We have mountains, forests, beaches, deserts, hills, valleys, wetlands, and mosquitos as big as 18 wheelers. It really is a versatile place, and the people (overall) are really kind hearted, good people. Of course with almost 18 million in population, we do have some weirdos, assholes, and crazies. Those three from Jasper that drug James Byrd, Jr. to death are an example of the lunacy and sadistic minds of some people. With a population as large as we have, there are bound to be some weirdos to contend with.Have a good weekend buddy, and have a beer for me. James DuHamel
*Joe,I don't see working with "established accounts" as a problem when it comes to price. With past customers, you are pre-sold. These are the people that are the least likely to be price shopping. Once you have an established client base, raise your prices.I'm not sure where you are in relation to your competion in pricing but you don't want to be too low. First, you are losing money and second, the best customers, ones that care about quality work, are wary of a low bid. I've gotten pleanty of work when I was the highest bidder (not that I always am).As far as working for lower rates for the small two hour jobs, I do the opposite. I have as much travel time and lumberyard time involved in a two hour job as I do for a day job. I charge a minimum of a half day for everything. I know that there are text book techinques for setting prices. I used the less scientific "what do I need to make to live" method. I figure I need to make $x each year to make the trouble of having my own business worth it and added the cost of insurance, gas, truck payment, new tools, advertising, etc., etc. Divide that by hours worked per year (don't think you'll really be on site 2040 hours) and you're got your hourly rate. I think I need to charge enough to take care of my customers after the project is done too. I'm not nearly the highest guy around. I think in my area it peaks at around $45.00 per hour. I thought about the price fixing thing before I posted. I think we're okay, none of us are in the same market and if we did all collude to set prices, we probably wouldn't make much of a dent in the cost of construction anywhere.
*In our area workers comp is not an issue on the independent contractor/employee argument. If I hire an independent contractor without workers comp. I still have to pay his workers comp. premium. If I pay an independent contractor 20 dollars an hour and he does not carry workmens comp. he is costing me about the same as and employee. I would have to pay about $1.40 an hour in payroll taxes for an $18.75 /hr worker. Also I would be required to hold out taxes on him (out of his money) and possibly pay unemployment taxes. The overhead for all this costs money. I would say you should get about $25/hr as an independent contractor (without workmens comp) to compare yourself with an employee. The 35 dollar an hour seems high but to truly meet the independant contractor status you must provide your own tools....this is worth something.
*Hi Crawdaddy.Thanks for saying so.One of the most difficult things in such circumstance is the lack of understanding people to talk to about it.I mention that so you might know the profound feelings I have for all who have helped me with understanding my experience. Which, by the way, cannot be over without a trial...But, thats another story...isnt it?
*
Someone threw me a curve...I need help with understanding...
He said I could have $18.75 per hour with taxes taken out or $20.00 per hour with no taxes taken out.
He told me about the benefits to me having an $800 a week salary. And the prestige of "Independent Contractor" status.
Since I prefer "employee" status when I agree to work as an employee, I think the $18.75 per hour is more profitable to me for many reasons.
But I dont get this guy's figgering!
Does anybody?
Am I the only one who runs into this type?
Help!
*By trying to get you to declare yourself as an independent contractor, he wants to get out of paying FICA, Medicare, workmans comp. etc. If you are not going to work for him forever, take the 20.00 and when you are done, call the IRS, the independent contractor status will not stand, he will have to pay the FICA, Medicare, etc - and you will have the higher wage. However, you will be liable for your portion of the FICA, Medicare, etc. Yeah, it is mean, but he is trying to stick you, and less you have control of when you report for work (not as rare as it sounds in this labor market), what jobs you do (again, not all that rare anymore), supply your own tools and take other jobs, bill for them an collect for them, you are an employee. The IRS is most firm on this. Have fun,Dennis