Employee or Independent Contractor: What’s the Difference?

Some professionals assume that contracting an independent contractor is the same as hiring an employee. Not only is this untrue, there is a distinct difference between the two. Virtual assistants, freelance writers, bookkeepers and other independent contractors are not legally on your  staff payroll. The IRS rules are clear in this regard, as ‘how’ you treat a contractor versus an employee or vice versa. Not abiding by the right IRA rule can easily raise a RED FLAG, resulting in an audit.

4 Top Factors to Keep in Mind

Resources. Who is responsible for providing the resources necessary for the work to be completed? Materials, equipment, or supplies are typically not provided to an independent contractor, and they use their own means. Employees are typically given access to whatever is necessary to complete the work.

“I pay for the software my contractor uses. If they are responsible for their own materials, am I running a risk of being audited?”  NO – as long as you properly record the software as your business expense.

Control. Who determines which hours will be worked? How much autonomy is given to the worker regarding how and when the work is done? Naturally, with both an employee and an independent contractor, preferences and specifications are given. However, the difference is that independent contractors typically set their own hours and complete work with little to no supervision or detailed instruction. They can take vacation when they choose, and set their own prices. Employees have regulations to follow and they are told what they will be paid and when they will work.

“I need a virtual assistant to manage my website’s LIVE CHAT from 9 a.m. to Noon. Are you telling me that makes the VA an employee and not an independent contractor?”  In essence, you are paying the VA to make herself available during 9 a.m. to Noon to address any questions prospective customers have regarding your products and/or services. If you are paying her 3 hours a day to do so, you may wish to ask your CPA if you should change it to real-time instead, meaning only the time she is actually addressing the questions.

Payment method and frequency. It is unlikely that an independent contractor would have only one client that pays their full salary. They earn money from a number of sources, and may be paid by cash, check, merchant account (aka Paypal)or another online payment system, and taxes are not withheld. While some agreements are long-term, the income of an independent contractor tends to fluctuate. Employees typically get consistent payroll checks with taxes withheld. Insurance benefits are also never provided for contractors.

“I am paying for a block of hours, consistently. Is this not the same as having an employee?”  Again, there are a few gray areas that need to be discussed with your CPA. As long as you 1099 your contractor, the IRS is likely to accept the standards in which you’re defining an employee.

Temporary or Permanent Work Load? In many cases independent contractors are hired to assist companies and entrepreneurs with tasks on a periodic basis. Sometimes virtual assistants are hired to complete the same tasks each month for the same client, but this does not necessarily mean that they are an employee or an official “team member.” The work type or amount can fluctuate, and there is no obligation on either side to continue beyond the initial agreement. Employees typically have a steady flow of work from day to day or week to week, and the responsibilities are listed in the job description from the beginning.

“I hire summer help to come into my home office, file paperwork, and assist me in organizing for the next year.  Someone told me that this could easily be considered temporary employment, which there are ‘employee temps.’ Is this correct?”  Yes – you are contracting temporary help. Often, the pay-out for such a job is less than $600; therefore, you need not be concerned as to if you’re paying them as an independent contractor or employee.

Can there be a team of independent contractors?

For legal purposes, it is best to avoid using the term “team” when talking about independent contractors. If a virtual assistant or freelance writer claims to have a “team,” they are really just subcontracting the work, and those other associates are simply subcontractors and not your (or their) employees. It is possible for a network of subcontractors to exist, but each individual has the right to decline work at any time without fear of losing employment, since it is not technically their “job.”

Think of it this way – If your home needs to be professionally cleaned, you contract a company to come in and clean. The company may have three employees do the job.  You’re not paying all three, only the company for services rendered.

The bottom line is that employees do not have the kind of freedom that independent contractors have.  Employees don’t provide their own resources and they don’t set their own hours. You can’t expect to dictate these things without facing the tax liabilities that regular employers have.

The Ideal Candidate for the Job | Do You Have the Right VA?

It's important, when selecting the right virtual assistant, to make sure that they possess the skills that qualify them as "the right fit" for your business needs. To understand and size-up the virtual professional you're considering, prepare for the interview ahead of time; it's essential to have a plan of action. Recognizing what you want in a VA, knowing the right questions to ask them, and understanding how to confirm the VA's credentials will lead you in the right direction and to the right virtual assistant for you.

Start with Knowing Yourself

First search yourself for some answers as to what you really want in an online business manager. What services or skills are most important to you, what programs do they need to be familiar with, and what kind of rapport should you have with them. Also think about the logistics; how will you be sending payment, how should they invoice you, will the work be hourly or project based, and would you be willing to sign a service agreement. These are just a few examples of things to assess about yourself before you actually begin speaking to potential candidates. 

Be Creative in Your Questions

Now that you know what you're looking for, it's time to prepare some questions for the VA's. When interviewing different candidates knowing how to ask the right questions will help you determine who lands the job. A list of questions to keep on hand might include the following:

Ø  How much experience do they have?

Ø  What professional certification do they hold?

Ø  What kind of education and training do they have in the field?

Ø  Ask them to talk about how they work virtually?

Ø  What kind of software do they use and what kind of office equipment do they have? (i.e. fax machine, scanner, web cam, etc)

Ø  What programs are they familiar with?

Ø  What types of skills do they have?

Ø  What skill do they specialize in?

Ø  What part of their work do they most enjoy?

Ask your candidates open-ended questions like these, and try to stay on point during the conversation. Take note when the applicant avoids or changes the subject; also recognize when the applicant "harps" or constantly refers to a particular subject. These tactics may divert your train of thought and may also act as red flags for you to consider.

Look for Flaws

After speaking with the candidates, validating their credentials will be a way to safeguard your time and efforts in engaging in business with a VA. A few ideas might include:

Ø  Getting references

Ø  Reviewing their portfolios

Ø  Giving an assignment to complete

Have them provide a list of references and contact them. Inquire as to whether they would work with the VA again and ask how they feel about the service that was offered to them. Also, have the candidates arrange a portfolio of their work for you to review. If you are looking for a VA with more specialized services like maintaining a website, writing blog articles, or social media management, you might want to consider requesting the candidates to complete an assignment. You could offer to pay them for this work or not; that's up to you. It will be the decision of the applicant as to whether they would like to proceed. Examples of an assignment might be writing an article or a few Twitter posts about a named topic of your choice. This is a perfect method of shaking loose those who are not serious about the position and will reveal the true skills and talents of those who are.

There is nothing like having a multi-skilled virtual assistant at your right hand; that's why working with a Virtual Executive Firm is so appealing.

When working with a firm like Hess Business Professionals & Associates, you have the advantage of being able to utilize all the skills that are offered by a variety of certified VA's all in one place. Professionals who specialize in remote skill sets like graphic designers, writers or editors, marketing managers, or online business managers will be just an email away. No need to go through the interview process over and over again every time you have a new project. Talk about made-to-order administrative support! Having confidence in your chosen VA firm will give you the peace of mind of knowing each virtual assistant you work with has proven themselves in the field and you will always know that you have the right VA!

Differences Between A Virtual Assistant And An Online Business Manager

No matter what you may have been told, a virtual assistant and online business manager are not created equal.  Both roles are important to operating an effective internet business, but only someone who is in complete control of your business can truly free you – a role performed well by an online business manager.

If you are planning to contract someone to act as your virtual support person, you should understand the role an online business manager plays verses a virtual assistant.  This is the same for career aspirants who want to make a living by offering virtual administrative assistance.

• Objective – The main focus of an online business manager, as the name suggests, is management. He or she acts more as an operations manager or executive assistant rather than a support assistant. It’s appropriate to view an online business manager as an associate partner who tends to operations, managing team players, and aids in controlling costs. A virtual assistant on the other hand focuses on getting the task done.  He or she is the go to person to get the job done.  Services often include data entry, web research, customer service, and administrative assistance.
• Responsibility – Being an associate partner, an online business manager is responsible for the overall success of the organization along with individual success. The same business pains you feel in a day are felt by your online business manager.  Your business is their business or at least that is the mindset of a good manager. A virtual assistant on the other hand worries about the organization’s performance only in the areas that affect him or her directly.  As long as the VA is providing excellent virtual support, their role is taken care of.  
• Client Management – In a normal scenario, a business manager will focus on 2 to 5 clients at a time, giving each one-on-one attention, and tending to the client’s business as if it were the only one.  Just possessing a knack for multitasking at a high-level of expertise is a skill-set often only found in an experienced online business manager. A virtual assistant tends to pick and choose projects and can be juggling 5 to 10 clients all within a 30 day period.  By no means does this suggest that a VA is capable of handling a higher volume of work, rather it shows that the normal VA works shorter contract terms than a business manager. 
• How Do They Help A Business – Business owners need to find more time on focusing the core business and an online business manager can be a helping hand. A business manager will provide excellent administrative assistance in their role as a project manager.  Doing so helps the business manager to escalate several tasks in their direction. Similarly, you don’t have to waste time on attending customer calls and responding to emails, but your virtual assistant will take care of that.

Though the roles of a virtual assistant and online business manager are very identical, both require a different level of expertise. 

Utilizing a Virtual (Remote) Assistant Properly

Today, the term “Virtual Assistant” is known among internet savvy individuals worldwide. The Virtual Assistant is utilized in areas like interactive marketing, website management, project management, and in the administrative field. Virtual Assistants (VAs) are unique because they’re able to multi-task while still managing time productively – a concept many Time Management professionals have yet to understand.

 

Although the term “Virtual Assistant” has grown in popularity, the majority of business owners struggle with how to tap-in and utilize a VA. Internet entrepreneurs like Informational Marketers were the first to explore this area of assistance. Through networking and the sharing of technical information, the interest in partnering with virtual assistant firms grew; however, the when, why, what and how to utilize such an individual has yet to hit the news stand. It is like a best kept secret among entrepreneurs!

 

There are several ways I recommend a business owner should use the skills of a virtual assistant. Here are just a few of the services provided:

 

• Small business bookkeeping
• Web research and data entry
• Mailing promotional material
• Managing projects
• Managing a team
• Customer service
• Blog and social media
• Writing newsletters and press releases
• Updating online profiles
• Setting appointments

 

 

The ideal VA is interested in a long term business relationship with you, and with minimal pains, this can be achieved.

 

First, you need to determine what needs to be done so you can stay on top of your business growth. This list should contain items that are on your desk eating up your day. From simply updating your contact list to revising your website or even designing a blog, the right VA can easily take the task off your hands.

 

Second, you need to provide all of your passwords and user account names. If you are even the slightest worried about your VA stealing information, you are not ready for this step into the virtual realm. A business owner has to feel confident he/she is making the right choice – that gut feeling – or the entire relationship is doomed.

 

Third, you should not be afraid to share with your VA that this is your first time. The professional virtual assistant will show you the ropes without criticism. But keep your expectations in check. Although most VAs is technically savvy, it does not mean they have all of the answers or can provide all of the services you require. Be realistic in your requests.

 

Fourth, you should stay to a budget but not be too frugal. You can find a VA for pennies on the dollar; however, you get what you pay for. Approach this with a reasonable budget that both of you will be happy with. Remember that you want your VA to save you time and money, not add to your frustration.

 

Fifth, your communication skills are important. Be ready to tell your VA when you can be reached and how you want to be reached. Most VAs use an instant messenger to communicate with clients but that might not be doable for you. Discuss what is!

 

Your relationship begins during the interview process. Make a list of what you are looking for in an assistant. Start with personality traits and then focus on skills. Because this is a long distance relationship, it is important that communications are pleasant and productive.

 

 

 

Outsourcing: Not Necessarily a Four Letter Word

Outsourcing has been going on for decades. For many of us, the term is a four letter word that brings controversial conversation to the forefront. The government actually has rewarded businesses that would outsource to other countries. With the state of our U.S. economy though, things are changing and the tax credits are being given to those who keep the jobs in the U.S. This is great news for the small business owner.


Outsourcing is still an inexpensive means to obtaining the products and services we need to operate our business. The focus should be on outsourcing to U.S. based entrepreneurs that specialize in bookkeeping, web development, project management, concierge services, executive administration, and architectural design. By doing so, you are cutting costs associated to hiring an employee and saving money that can be spent on obtaining a higher return.

In all honesty, outsourcing is nothing more than subcontracting an individual or company’s staff to complete assigned work. Many industries practice this on a day-to-day basis. For instance, Comcast a leader in cable television and Internet service subcontracts labor from other companies. The subcontractor simply represents himself as an employee of Comcast. The bottom line – Comcast is saving money by not hiring these individuals as employees.

It is time to change your opinion about the term “outsourcing” in association with cutting cost in the U.S. Instead, learn more about how your business can gain an edge in a down economy by subcontracting to a virtual firm or freelance virtual assistant.

Besides the obvious savings in employee costs, our clients find that they have more time to concentrate on building their business.

“The simple act of releasing my day-to-day tasks over to Hess Business Professionals relieved me of so much unnecessary stress. Their support has been a godsend”, Andrew Holloway of Technical Treasures.

“Our Human Resource Department was overwhelmed because they were handling customer care as well. Subcontracting Diane Hess and her associates to handle our customer complaints and collections, took the pressure off our girls and helped them be more productive”, Joanne Limbert of City Waste.

In the later months of 2010, we are expecting dynamic changes to how businesses owners operate their businesses. It is a fair assumption that once corporations learn more about the advantages to subcontracting to business firms, the U.S. economy will begin to grow again. The goal now is to inform U.S. businesses that there are options to cutting employee costs and it all starts here. Outsourcing does not need to be a four letter word in the circle of friends and colleagues you trust.

Simplify Business: Go Virtual

Now is the time to take your company to the next level and go virtual! What are you waiting for? With today’s poor economy and stock market issues, there couldn’t be a better time to act. It’s true, whether you support John McCain or Barack Obama on the issues that surround taxes and small business in the United States; your business can only prosper if you’re open to change.

The transition from what you know as a brick and mortar business to the virtual realm of click and point is not all that difficult to achieve when you have an experienced virtual executive leading the way. In the earlier years, business owners would shrug their shoulders when asked if they new what a virtual assistant was and how they could benefit from our services. Today, Entrepreneur Magazine and shows like 20/20 have provided segments on how entrepreneurs and small business owners can benefit financially from hiring a virtual assistant. The spot light being turned on our end of the virtual industry has made my job of simplifying your business even easier.

How will your business benefit?

The greatest benefit to you is the elimination of paying employee taxes. We operate as independent contractors and pay all of our own taxes. Some business owners choose to 1099 us at the end of the year, while others write our services off as a business expense. The choice is yours.

What is the biggest advantage?

Turning your business over to a virtual executive firm like Hess Business Professionals & Associates means that you have access to a hub of service providers that can meet the needs of your business in any area. This includes but is not limited to web development and design; web content and ghostwriting; bookkeeping and tax filing; interactive marketing and ecommerce support personnel. The possibilities are endless.

How do you go virtual?

It is quite easy. Whatever your current secretary can do in the office, we can do virtually. If you need your accounting done, that too can be handled using virtual tools like Log Me In or QuickBooks Online. The internet virtual tools are endless. All that is required is that you are flexible, passionate about your business, and willing to work with someone who shares that same passion putting your company’s needs first.