I’ve been building a workshop for myself. Last fall, as I was preparing for the daunting task of putting 24 square of arch. shingles on a 14/12 pitch roof (by myself), a guy pulled into my driveway on a scooter. He told me he was a general construction laborer and that he was looking for weekend side work. We talked a couple of times over the next couple of weeks – enough for me to get comfortable that he knew what he was doing. He named his price, and I agreed. As the job got closer, I started seeing the liability risks I was getting into. I did some research and drew up a contract to try to shield myself from an injury lawsuit. He signed it and we finished the job over the next two weekends. That was last October.
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Recently, the guy called me up and asked me if I had any more work. Between finishing up the shop and starting the house, I’ve got plenty of work. But I recognize that I probably dodged a bullet last time and don’t want to press my luck.
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So, what do I have to do to hire this guy the right way? Do I have to go through all the Social Security/ Workmans Comp/ tax with-holding stuff that a full-time employer does? Can I hire him as a contractor of some kind and just buy insurance that covers him in case of an accident? I only expect to hire him for a few days each month.
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Before you crucify me here, I am not trying to be a cheap@ss, take advantage of this guy, or cheat the local contractors. The guy is a hard worker, asks a reasonable price (I paid him $600 for 4 long days of work.) and seems to need the work The roof arrangement worked out well for both of us, I think. I’d like to work out a legitimate and mutually beneficial arrangement, if that’s possible to do without hiring an accountant.
Jon
Replies
jon.. does Md. have any licensing laws ?
if so...and he's got a license, then all you need is a contract and a Certificate of Insurance from him
between his GL.. and your homeowner's ins. you should be covered. Just define the scope of work and let him have at it
he's not your employee... he's just your contractor
I agree with mike if he is licencnsed... however my understanding is that he is just bringing him on for side jobs under his direction and control. Doubtful the fellow is licensed... so he runs the risk of being declared an employer in this circumstance (as I understand the situation).
My biggest concern is teh guy getting hurt with no WC coverage. Many states will continue up the food chain for WC injuries... including the contracting authority (the homeowner in this case). With license or not. Contractor or not.
Second concern... though not nearly as high... would be the "employer test"... which he could... or could not pass. By payrolling the guy with a temp firm... no fuss, no muss... and as conservative as can be (without an accountant).
Edited 3/8/2005 3:34 pm ET by Rich from Columbus
I doubt that he has a license. The temp agency is a great idea.
What should I expect to pay? "Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
Not being familiar with rates, etc in your area... I am at a loss for exact numbers.
You will be paying an up-charge of XX% of his base pay rate. This will include unemployment, fed unemployment, FICA, FUTA, local or state employment taxes (not familiar enough with Maryland to know if you have any of these or not), Worker's comp... and the cost for administration of all of the above.
You will NOT be purchasing liability coverage (no exception)... nor employer's liability (except in cases of EXTREMELY good firms).
Around here (ohio)... the cost would be about 75% of his base wage... plus, of course, his wage. Steep... but still cheaper than the alternative if you do not have the infrastructure in place to handle it. And the liability for statutory employment resides with the firm (keeping records for multitudes of years, compliance, etc)
One other note.... maryland may have an "employee leasing"(aka "Professional employer arrangements") statute. If so... a quick consult with the agency responsible for licensing (or registration) will provide simple answers to any additional requirements on your part... and a good resource to see who is licensed to conduct business in this fashion and have met requirements.
Be aware, however, that SOME employee leasing statutes exempt temp firms... thus are not applicable if you contract with a LICENSED TEMP firm.
If that is not clear... I will try to clarify if ya let me know. It can be confusing... I know. But once you get a handle on it... it makes total sense.
Edited 3/8/2005 4:01 pm ET by Rich from Columbus
Edited 3/8/2005 4:03 pm ET by Rich from Columbus
What you will pay the temp agency will vary with location and the classification of your temp.
Under the construction classification in Jax, FL, I pay $13.69 per hour for unskilled and $16.43 for skilled. If the temp does ANYTHING other than stand around you can bet he'll be complaining to the agency that you owe him skilled labor wages. In your case, there's no doubt he will be in the skilled class.
What the temp employee gets from this relationship is $6.25/hour (unskilled) or $7.50/hour (skilled). You get the payroll service and his w/c insurance covered. Four hours is the usual minimum.
It is permissible to send your handpicked worker to sign up at the temp agency and request his services. It's a pain to travel to the agency on a daily basis to pick up the work ticket, but without that ticket, the man doesn't get paid and, more importantly, you have no proof of w/c coverage should a state investigator show up on the job site requesting, "Your papers, please".
It doesn't sound like he would be making the same money through the temp agency as you would pay him under the table and you didn't hear it from me that it would be kosher to make up the difference in cash.
The other way to have an employee that is not an employee is to contract with an employee leasing company - not the same as a temp agency. These firms require your man to be at least a 40 hour/week worker and for their fee do the entire payroll, w/c, bennies, etc. You set the base wage and they do the calculations/ paperwork and keep Uncle Sam and your state happy. You usually get a better w/c and liability rate this way as they have a track record. My electrician of choice works this way. All his employees, as well as himself, are leased.
You would do well to make some calls to the two types of employment agencies and get the straight poop. Some of them offer both services.
Just in case y'all weren't aware (or didn't remember)... I owned a rather large employee leasing firm and managed an even larger one before that.
For a one off... employee leasing firms (or at least any that are worth their salt) are not set up to handle this particular situation ... nor would they. I simply point out the licensing as a resource for JJShaw... not because I think it is even remotely the correct avenue to pursue (in this case).
Don't confuse "call-em up and order a temp" with "payrolling" guys. The cost for payrolling is MUCH less... and the pay rate is agreed to by the employee, the client (JJ in this case) and the temp firm.
Edited 3/8/2005 4:26 pm ET by Rich from Columbus
Edited 3/8/2005 4:33 pm ET by Rich from Columbus
If you go with the temp agency (and that sounds like a great idea), tell them what you want him to get then let them add in their 'overhead' to get the rate they'll charge you.
Contact a local temp agency and explain that you would like to "payroll" an employee for a short period of time... and on an occasional basis.
Temp firms that specialize in construction should be able to do this with no problem... as long as it is allowed under state staute... which last time i looked, only one state barred the practice.
This covers the employer taxes and the worker's comp etc (be sure to check out the temp firm to assure they are licensed in your state and have proper WC coverage for construction work).
The way this works... they hire the employee... then contract with you to provide the employee on a temp basis. You become the site employer (responsible for supervision, safety, etc... they are the statutory employer. For those who really want to know... it's called "co-employement".
Now... contact you home-owner's agent and explain your situation with a temp worker being used on an occasional basis. Many HO policies will provide a rider for coverages needed. If not... you may need an umbrella policy that will cover the risk.
Hope this helps.
Rich, thats a great tip.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Ahha! So that's why construction is so expensive! All that insurance and liability stuff. I loved the sucinctness of your concerns and have already placed your post in a "Why does it cost so much? and Why can't you come down on your price?" file.
If you go through a Temp agency I am not certain that if there is an accident, they/ their insurance co will not find you negligent in either supervision or safety precautions. This probably won't be difficult to do, since you are not a full time GC/ tradesperson, don't have the experience that comes with years of exposure to various site conditions and aren't aware of the "notices" from the fine folks at OSHA.
If you do go through the temp agency, the cost of hiring him will be far greater than what you are paying him now with marginal benifits - taxes taken care of. IIRC - you are allowed upto $800 or $1k for random employment as a non-business before you are liable for employment taxes. Don't know why that came to mind. I just read it somewhere, maybe. Otherwise we would need to be concerned about higher the kid down the street to mow our lawn or shovel our snow.
Hiring a laborer for roof work was just plain stupid and you most certainly dodged a bullet. Roofers have one of the most expensive insurance rates of all the construction trades - for a reason. For work on the ground, with limited use of powertools - saws, demolition hammers, torches, etc, you should be fine winging it. Once in a while I hire an "undocumented worker" and am nervous the entire day that something will happen. Sometimes the random hire isn't worth the liability - sometimes ya just take your chances.
BTW - Great Monty Python quote in your Bio Page. I just saw Spamalot! on Broadway. It was terrific. If you have a chance to get to the Big City, I highly recommend it. The quote was used in the play too. David Hyde Pierce, Tim Curry and Hank Azaria. Outstanding!
F
It has nothing to do with how much the guy gets paid (in most circumstances).
The guidelines for who IS an employee.. and who is not... is explained in detail here (beginning on page 4): http://www.irs.gov/pub/irs-pdf/p15a.pdf
To answer the earlier question... this is one of the 'compliance areas" for ONLY the IRS for an employee. Then pile on state unemployment, Fed, Work comp, etc... well, you get the picture. Exciting reading huh? LOL
One good thing, though... with only one employee... he doesn't have to comply with the FLSA (at least most parts of it)
(and to think I did this stuff as opposed to swinging a hammer for the majority of my life.... WHAT was I thinking? Believe me... swingin' a hammer is BY FAR more rewarding and much more interesting and challenging)
Edited 3/8/2005 4:46 pm ET by Rich from Columbus
Frankie,
No question that I pushed my luck hiring this guy for the roof work. ...... OK, it WAS "just plain stupid."
I was in a tough spot and didn't have many options. I'd tried for over a month to get bids from local contractors. Only one outfit even responded to give me a bid, and they wanted $15,000!! I had no desire to do the work (deathly afraid of heights.), but I had to get shingles down before winter and I couldn't bring myself to spend that kind of cash. That doesn't justify a bad decision, but it's the circumstance that led me to make one.
I'd love to get up to The City to see Spamalot!, but doubt that it will happen. First, I don't have a lot of free time these days. Second, my wife thinks Python is "stupid." She thinks the AFLAC duck is hilarious, but calls any type of parody "stupid." So, I seriously doubt that I'd get her to sit through Spamalot!. Unless, of course, there are talking animals in it.
Thanks for the hiring advice. The tax liability is a concern, but nearly as big as the injury liability. He needs some kind of coverage if he gets hurt, and I don't want it to be my retirement savings. I have to sort through the details. "Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
Sorry to weigh in here, after you've had so many good replies... does this guy you previously hired have any type of insurance? I read thru the replies & didn't see that anyone asked that -- a contractors license, yes, but not insurance.
We work as electrician/handyman service, and carry business liability insurance that covers some medical issues. I also have medical insurance that covers emergency work related problems and will move over into my standard medical if a problem is on-going.
If you really want this guy again, you may want to consult an attorney to draw up a contract. No contract, not even a temp agency one, fully protects 100%. But is the work you want him to do that potentially hazardous?
Yes, insurance costs drive up the cost of everything else. The insurance companies have made record profits even after paying for floods, hurricanes, tornadoes & other natural disasters that cost millions. But that's a story for another day......
Freewheel does bring up an interesting point.
Anyone know for sure if Md is an "exclusive remedy" state? In other words... if no intentional violations of safety rules, etc are present... nor intentional inflicting of injury (obviously)... is the worker's exclusive remedy through the worker's comp system?
I know it is in Ohio (though it is under continuous assault and attempts at erosion in the courts)... but not sure about MD. I am sure a quick call to MD's work comp agency would answer the question.
In the event it is NOT (an exclusive remedy state)... then employer's liability is a must. If it IS... then employer's liability has its plusses... but not as dire a need.
Edited 3/9/2005 11:22 am ET by Rich from Columbus
Rich,
Thank you very much for your advice here. Even though the details make my head swim, and that IRS document just about put me asleep at my desk, these are all the details that I need to know to sort the problem out. I'm investigating temp firms, trying to find one that deals with construction labor and one that isn't 45 miles from the job site.
If I tried to encourage him to get a license and insurance, how hard would that be for him? Is it a matter of passing a test, documenting a certain number of years experience, and paying a fee? If he could accomplish that, he'd be in better shape than if I paid a bunch of money to a temp firm.
Anyway, thanks again for your help!!
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
"If I tried to encourage him to get a license and insurance, how hard would that be for him?"The license can be anything from a day long test and background checks, and referecnes to $25 and a name and address to nothing.Depends on the location and specific trade(s).
Here's what I'd like to know -- just WHAT is the work this guy would be hired for? How long is it anticipated to take to finish?
This seems like an awful lot of paperwork, worry, etc. just for a few days' labor.
Does the guy have other employment? Was a simple background check ever done?
I've never asked, but I'm sure the guy has no insurance.
I wish I could just buy insurance to cover the guy and leave it up to him to report his income. But that's slightly irresponsible and wildly unrealistic.
I don't plan on putting him on a roof again, or involve him in anything particularly hazardous. Even so, I'm not willing to risk hiring him completely under the table again. There's just too much to lose.
The temp agency seems like the way to be, along with minimizing the danger I expose him to at the job site. "Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
I wish I could just buy insurance to cover the guy and leave it up to him to report his income. But that's slightly irresponsible and wildly unrealistic.
Sounds like a plan to me. Happens all the time around here. There is no licensing in PA. Basic contractors insurance can run about $300-$400 dollars ... if someone needs an off and on again helper .... lotsa people go to their ins agent ... helper sets it up .... buyer pays the year's cost .... then ya 1099 him .. just like he walked up to U with insurance in hand.
nothing against the law about helping someone start set up their own real company and then be their first customer. After your job ... he's set for a years worth of side work. You're gonna 1099 him .. so he'll now be paying taxes on that under the table money he's now making .... so he'll want a raise .... I'm thinking the insurance buy in would be considered that raise? Same guy .. same hourly ... all it cost U extra to be legal is the insurance buy in.
Guess it depends on your local license requirements and insurance costs.
Jeff
Jeff Buck Construction
Artistry in Carpentry
Pgh, PA
The temp. services for unskilled or semi skilled labor that I have been involved with just play the middleman and take a cut of the money. If you have the guy picked out and the wage is agreed upon, then the service will take care of WC, SS, taxes, etc. and charge you the increased rate.
He fills out a time card, you sign it and he mails/faxes it to the service and he gets a paycheck from them. You get billed from the service for his hours. No health ins., benefits, etc. but the legalities are covered. There is usually some agreement that they get a fee if you hire him direct before 6 months or some term.
This is my experience and may not be true for all areas and services.
Lefty - Lurker without an attitude or a clue
What Jeff B. said in his message to you.
I'm from Iowa and we didn't need a licence to be subcontractors. All we had to do was provide proof of liability insurance.
I paid under $500 for about a million in liability. Of course that may differ in your state.
Doug
What's up with the idea of helping the guy set up in business? Wish someone had done that for me!
First, what's the exact nature of the work you want this guy to do? How long will it take? Did you check any references, background, other employment? And u said "I'm sure he doesn't have insurance"; does that mean you asked about insurance?
In some states, moonlighting is not allowed by certain unions, and of course employers. So you need to know what his "real job" is. Here in PA, a union electrician cannot do [get caught] electrical work outside his union, but it's okay to do other work, like plumbing. Which may involve electrical work! So there's a fine line.
It just seems that you are limiting yourself to an unknown laborer by going thru a temp agency, that will charge you more money while not giving much to the worker, and eliminating someone you worked well & were happy with before who may need the money. Have you expressed your concerns to him?
This is an awful lot of headache to go thru just for some day labor.
You make some valid points.
No, I've never done any background checks on the guy.
The situation is a little more complicated because I'm an everyday Joe trying to hire another everyday Joe. If I had the experience and resources of many of you Breaktimers, or if this guy was a licensed contractor, this would be a non-issue.
I don't know where to find reliable help, and I'm not set up to handle payroll/taxes/general employer headaches. I have inquired about hiring help from a contractor I know. You can imagine how that went. I don't blame the contractor at all. He's busy and needs his guys for his own jobs. Anyway, it was going to cost me $35/hour and I had to pay him for his hour-drive to and from the jobsight. That's $350 for a 8-hour workday!
Even if I find a temp service that deals with construction laborers, I'll have no idea who I'm going to get. I have even considered the "7-Eleven parking lot labor pool", but I'm just not comfortable with it.
Honestly, I'd love to spend the money on a contractor that could bring in his own guys. But times are so busy that I can't get much interest from them. Short of hiring a GC to take over the entire job, I don't see that changing. Owner-builders are just at the bottom of the contractor priority list. Heck, I'm still haven't gotten my electrical hookup. I've been trying for three months to get the power company to run service to my meter panel. They FINALLY got the road bore done this week. Maybe I'll have power by summer. Maybe I won't.
Anyway, this guy does good work and is eager to work for me. That's been hard for me to find. I'm not going to go to extremes, or expose myself to liability risk to hire him. But if I can work out a reasonable arrangement, I will.
Sorry for rambling.
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
Well you have two separate issues here.One is taxes. They are a pain, but realy not that hard once you get the forms and tables and now what to do.But as other have mentioned you can get a payroll service to do that. Now for one person it will probably be "relatively expensive", but not a huge expense.And you might also check if he can be treated as household help. That is even easier. Just a couple of extra lines when you file the 1040. However, I don't know how the state would handle that.The other is workers comp insurance.Check with your insurance agent and see if they have a rider for casual or household help that would cover this.
I hear you & understand. Went through the same thing last summer, while working on a project house for my cousin. Tried to get help, and no one was interested and/or available. Finally got a guy who would do a metal roof, but he was definitely not my first pick! We finished in the snow & freezing temps. The heating guy was just the opposite, he worked way too fast & I had to stop him by having a screaming fit at the installers in the driveway (they came over when I told them not to not once but 3 times). We're going back to the site in a few weeks, when the weather clears (in upstate PA near the NY state border), and I'm keeping my fingers crossed that everything is okay.
Bottom line -- I'd take the guy you had before back. Ask him about his present work, if he has insurance, the whole deal. Be honest w/ him & say you are concerned about liability. And ask an attorney. For a fairly modest fee, one can draw up a contract for you where you are reasonably protected. And they can advise you about said liability.
"For a fairly modest fee, one can draw up a contract for you where you are reasonably protected"
Contrary to popular beliefs, contracts cannot circumvent law. A worker cannot "opt out" of their protections under WC laws.
In Ohio (the state I am most familiar with, obviously)... even IF the work is properly contracted for, yada yada... the liability for WC passes uphill. If a sub has no coverage... it rolls up to the GC. If the GC has no coverage... it rolls up to the site owner. And the state is dead serious about enforcing it.
"For a fairly modest fee, one can draw up a contract for you where you are reasonably protected"
What complete BS. You can't draw up a contract that reduces or eliminates your responsibilities as an employer. You can't make a contractor out of an employee. This stuff has been tested in plenty of tax cases and insurance cases. The only protection the homeowner can get is by making the worker a legit employee with workers comp insurance in place.
Taxes are a pain, but not that hard.But check with your HO insurance. If I am not mistaken you can get a rider for casual household help.Don't have any idea if would cover situations like this or not.But I am sure that this comes up often.
The guy's a hard worker, he satisfied you the first time, hire him.
mike
...he satisfied you the first time, hire him.
Wish you hadn't phrased it that way ;) But, yes, I was satisfied with his work. There should be a way to work this out without costing me a fortune in time or money.
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
Call a payroll service and see what it would cost to have them do payroll for you. That way the worker would be completely covered by comp and your relationship with him would satisfy the IRS. Or, go thru the steps yourself to get an EIN and a worker's comp account. Here is WA it can be done very easily and at no cost.
I'm not sure I want to know if my homeowner's would cover the death, disability, or dismemberment of a casual worker at my house.
since yer still here ...
here's my real take on it. You're a homeowner. So far as I know ... it's not against the law for a homeowner to ask a guy to do some work ... then hand him some cash at the end of the day. Happens everyday all around the world.
you probably aren't required by law to hire a licensed whatever to do what ever work it is that you'd like done.
the other answers were all about being "legit" ... and safeguarding yourself from lawsuits. A valid concern, but ... seems way more simple to just hand a guy some cash at the end of the day. That's what I'd do, as a homeowner.
On my job site .. no freaking way .... but "handymen" across the country get handed a fist fulla cash everyday and the world doesn't fall apart.
The good old days ....
if we eve have another depression are we gonna have to hire a lawyer before we pay the guy who painted the garage a bowl of soup like my Grandma used to do?
Jeff
Buck Construction
Artistry in Carpentry
Pgh, PA
A guy I work with has a friend who was hired for cash to do some roof repair. He fell off the roof and broke his back. His medical bills went into the hundreds of thousands range, and he was forced to sue the homeowners to get money to try to pay his doctors. The HOs insurance did not pay the entire cost of the suit, and the homeowners were out a huge amount of money, which they had to raise by selling the house.
So... what's the advantage of paying cash? There are several good ideas on the table for keeping it legal and safe.
the HO's took a risk. They lost.
He wasn't forced to sue them, btw. He took a cash job and fell.
advantages to paying cash ... 99.99% of the time .. quicker/cheaper/easier.
it's the one .01% that'll bite ya ... usually hard.
risk assessment.
got a buddy that roofed his new garage for $150. 3 different crack heads ... 3 days .. $50 each. Got a real nice roof for $150. Wouldn't recommend this to everyone ....
he's got a high tolerence for risk.
Jeff Buck Construction
Artistry in Carpentry
Pgh, PA
I used to see the results of no work comp on a regular basis in my former life. REAL ugly.
Even if the guy has health insurance... the insurance company will look to subrogate the claim. The worker has no choice in this case... the insurance company has the right to subrogate any claim, with or without the insured's permission.
It is "buyer beware" in most states when it comes to home repair and work comp. If the contractor has none... then the site owner has the ultimate responsibility.
In Ohio... it is real easy to get a "compliance only" certificate ($10 every six months). All premiums are paid retrospectively.. so it is easy to properly calculate premiums. NCCI states... not so easy.
I have recommended to more people than I can count to get a compliance policy. One guy was real happy he did... a neighbor kid (17 yrs old) was mowing his lawn and had a blade come off the mower. Comp paid the med bill and the permanent partial disability he was awarded. Would have cost the homeowner dearly if he did not have the coverage.
Cash is great... as long as nothing happens and no one finds out. But when the consequences could ruin the one paying the cash... I say to err on the side of caution.
Edited 3/10/2005 11:43 pm ET by Rich from Columbus
Re: your last line - painting Grandma's garage for soup. Excellent point.
This whole deal is way too complicated for this homeowner. You are right about the cash deals, happens all the time. But we, as a handyman service, encourage people to check our liability insurance and references, even if they're paying us cash to just remove an old vanity cabinet, etc. And we see stuff every week that "licensed contractors" have done that they should be ashamed of! I'm sure you see the same.
Bottom line is that the homeowner should be honest with this guy, and check him out a little. If he has nothing to hide, and the homeowner is comfortable with him, a cash deal is the way to go.
Jeff,
I see your point. There's nothing to stop me from paying this guy cash for labor. The IRS PROBABLY would never know. He'd shield some income from his ex-wife - who is taking most of his paycheck for alimony - and I'd get affordable, available, and dependable help.
But I also see your other comment "the HO's took a risk and lost." There's just too much to lose here to NOT spend the time/effort to shield myself from that risk. Why build my own house, just to have someone else live in it?!
It's really too bad it has to be this way. The guy is an adult. He should be able to assess the job and jobsite risks, sign a liability release, and then take responsibility for his own health and well-being. But that's not the world we live in.
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon
When you roofed that 14/12 did you have an OSHA compliant setup?
I'm sure you know the answer.
I did have a fall protection outfit that I offered to my worker. I noted that on my contract and had him initial that he was declining that offer. (I didn't wear the fall protection harness either. Way too cumbersome.)
I also provided a shingle hoist, which mitigated part of the risk, and I was very concious to keep the ground clear of hazards. If one of us fell off the roof, we wouldn't impale ourselves on a pallet or sledgehammer handle.
Bottom line: I made the job as safe as I could, but I'm sure OSHA wouldn't have smiled upon it.
The roof job was a typical cash-for-labor job. ie Above average results for a below average cost, with an associated risk that could have cost me a fortune. It's a risk that I won't take again.
"Listen, strange women lying in ponds distributing swords is no basis for a system of government."Jon