Contractor vs. Employee?

How do you know when to hire contractors and when to bite the bullet and hire employees? And, when you do decide on contractors, how can you assure that contractors don’t eventually file for unemployment, demand overtime rates, and payroll tax payments—especially when you end their assignments?   Or, did you think that contractors couldn’t do that?  Think again.

Most growing small businesses are regularly faced with important human resources decisions within tight budget constraints. On the surface, we think a contractor is cheaper (e.g. not paying income taxes to IRS) less risky (e.g. I can let them go any time I want) than employees. Plus, it seems everyone else is doing it, so it must be OK. Unfortunately, national and state regulatory agencies are also paying close attention to small businesses decisions around this topic and it’s turning into a much more expensive option than expected.  I’m actually seeing clients pay increased unemployment taxes for contractors who proved that they really were employees.  I’m reading that the Department of Labor is ruling in favor of contractors so they get paid time and half when working over forty hours in a week.  How can that be?

Agencies are tightening the definition of employees so very few workers fit the contractor category. Here are a few key principles to keep in mind:

  1. If a contractor is performing your core business, then they should probably be an employee. For example, if you hire a contractor to cut your lawn or fix your plumbing, that is probably OK.  But if you are a lawn maintenance or plumbing company, that worker should probably be an employee.  Make sense?  Even the UBER model is being challenged in the courts.  They provide drivers- their core business – but all workers are currently classified as contractors.  Now, those workers are filing unemployment and workers compensation claims all across the country and they are winning.
  2. If a “contractor” is misclassified and the person works more than forty hours in a week performing functions that normally would be considered non-exempt, then you might owe them more money (i.e. one and half times their hourly rate).
  3. If you treat contractors too much like employees – such as failing to having a written contract, giving them your domain to use for an email address, and regularly inviting (expecting) them to attend staff meetings and company social event – you may be subject to unemployment liability (i.e. higher taxes) when you end their assignments.

So, what can you do?

  • Put a good contract in place that establishes your relationship.  Use a lawyer or LegalZoom for help. Pay by the project or outcome.  Make accountability clear and establish terms to end the contract.
  • Allow contractors to work for others so it is clear they are not dependent on you.
  • Do not issue company equipment, email addresses, server use, office space or other resources.
  • Expect contractors to gain their own expertise and manage their own time in order to get the job done.  If you have to train them to do YOUR business, YOUR way, all the time…they are employees!
  • Don’t call them employees.
  • Create boundaries and revisit them to clarify and establish your relationship.
  • Hire contractors as employees as soon as you realize the right way.  Pay back wages if necessary.
  • Call me for help in hiring contractors as employees – or more clearly establishing a true contractual relationship.

Be proactive and take action, before someone takes action on YOU!

E-mail–Communications Tool or Trouble Maker?

Despite all I know and teach about communication and interpersonal skills, I’ve been guilty of sending (and regretting) an e-mail or text used to address a concern or frustration. I’ve banked on my reputation or what I thought was a good working relationship to fill in the gaps that I know e-mails can’t fill. I’ve also been on the receiving end of an e-mail sent to get my attention on an issue or to identify a problem area. It doesn’t feel good and it doesn’t do much to establish or maintain trust.

I know the excuses:  we are busy, working remotely and trying to be as efficient as possible. We incorrectly assume that we are just stating facts and the other person just hasn’t seen the light.  And, yes, we have all these great tools like e-mail, texts, tweets,, instant messaging, facebooking, blogging, etc.  If we have them, why don’t we use them to their fullest?  I’ve learned over time, though, that those excuses and all the tools NEVER justify the damage done from an ill-timed (inappropriately used) electronic communication.

Here are my personal tips to most effectively avoid or resolve conflict when it comes to using e-mail:

  • Don’t send emotionally charged e-mails when you are tired, or at the end of the      day, or at night from home when you’ve just finished a beer or glass of  wine. Just don’t EVER do it.
  • Resist the temptation to fire off an e-mail reply if someone else sends a nasty or  emotional one.
  • Take a deep breath and REALLY think about what you want to say…or what you really need.
  • Go visit the person.
  • Schedule a meeting and establish your needs and expectations for the future. I always feel better after the meeting than after that reactive e-mail.
  • Remember that an e-mail in your in-box is just a stimulus…you can      CHOOSE your response, including your timing.
  • Wait until things cool down.
  • If two e-mail exchanges don’t solve the problem or clarify a situation, pick up the phone and talk about it.  Just ask…”What did you mean by ….?” or “I was left confused by what you said, can you explain it in person?” When I do that, I usually find I jumped to the wrong conclusion or that someone wasn’t as upset as the e-mail made them sound.
  • Draft your e-mail AND save it.  Wait a day, re-read it nd THEN decide if you still want to press <send.>  I often ditch it or rethink my perspective.
  • Ask a trusted co-worker to read your e-mail and be honest with you.  Ask      yourself, is your intent to “hurt back” OR solve the problem without long term negative effects? If it’s the second goal, then schedule a meeting …for later.

Ok, once more…just pick up the phone and talk in person….use that draft e-mail as your script, if necessary.  If you can’t say the words out loud to a live person, then they should not be conveyed at all.

Managing People Means Managing Work Performance

As a manager, you might be going in the right direction, but are your people with you??  Are they motivated to keep reaching goals?

The end of the calendar year for many organizations is the perfect time to reflect on accomplishments and new goals.  While this process should be dynamic (i.e. goals and priorities can change throughout the year), it is good to stop periodically to document and, better yet, discuss with employees how things are going and where to go in the future.

Effective performance management assures you are not alone and you consistently achieve your business goals. Here are a few key principles to keep you on track:

1.  Describe past performance as if you are painting a picture or taking a snapshot

  • Be specific; avoid general terms.
  • Avoid lecturing
  • Use the formula:  DID + WHAT + HOW + IMPACT
  • Example:  Developed new employee procedure manual by December 1, 2012; using simple terms with appropriate industry lanaguage; new workers are better prepared for job duties–working solo within 2 months, improved previous start time by one month.

2.  Set clear expectations

  • Use the formula:  DO + WHAT + WHEN + HOW
  • Make expectations SMART – Specific, Measurable, Attainable, Realistic/Relevant, and Time Sensitive
  • Example:  Develop new employee procedure manual by January 30, 2013, so new workers are prepared to work solo at XXX operations within 3 months of hire.

3.  Provide feedback and coach employees throughout the year

  • Schedule 1:1 meetings regularly
  • Update expectations as priorities and challenges change
  • Document performance issues and discussions when they happen
  • Provide specific praise by including the impact of good work; don’t just say “you did a great job!”  Include why it was good.

Contact Cherylann for additional ideas, new supervisor coaching and for workshops to practice goal setting and performance discussions. Call 512/517-7589.




Ground Rules for Facilitation Meetings

Do you find it challenging to corral a large group of people in order to make a decision or resolve an issue?   I recently completed a conflict resolution session where there were many issues, personalities and passions at play.  Below are the ground rules we used to guide our discussion.

  • Stick to timeframes
  • Ask Questions for clarification, not accusation
  • Focus on the future
  • Respect the past
  • Check assumptions at the door
  • Listen / Seek to understand…before responding
  • Avoid Point – Counterpoint —  Go for “interests” not just “positions,”
  • Real or Not real?  – Distinguish a real “rule” from a personal/group unspoken rule, expectation, hope, desire, etc.
  • No side conversations, only one person talking at a time
  • Let’s hear from everyone, don’t dominate

Let me know if these work for you and if you have other ground rules to achieve your meeting goals.

Take care,   C2

Welcome to C2HRSolutions!!


Hi there!

As I start my new HR consulting practice, I plan to use this blog to share insights and ideas that will help our individual and organizational effectiveness.  I will draw from over 25 years of experience in professional work settings as well as various community activities.  Regardless of the setting, the aim is to enhance our interpersonal and self-awareness skills as we achieve our goals. Some ideas may be easy to see and implement, while others involve inner work that goes deeper and may be harder to see at first.   As I get going, perhaps you might chime in with your own reflections on what works (or doesn’t) for you. Finally, if there are topics you think I should address, please let me know.

Take care,


The Effective Workplace Advisor

Learning skills and insights that will last a lifetime…

  • If you give a man a fish, you feed him for a day;
  • If you teach a man to fish, you feed him for a lifetime.

                                                                -Chinese proverb