There’s a lot of you who are renting out rooms and bringing more massage therapists…
Today for y’all, I’ve got what some might consider a little bit of a hot take – I mean, I don’t really think it is, but ya know, the internet….
When you want to bring more massage therapists, an esthetician, or whatever other professionals, into your business to expand and grow, you should not have independent contractors. I know all kinds of people aren’t going to agree with me and that’s perfectly fine, this is just my opinion sprinkled with the reasoning and the legal parameters of why I have this opinion. So whether you hate me for this or not already, let’s jump in.
All kinds of massage therapists bring on other therapists or other professionals as independent contractors instead of employees. Before we dive into why I think this is a bad idea, let’s look at the difference super quick if you’re not familiar. And you can check out the IRS page on this HERE so you can see this part isn’t just my opinion; this is the way the tax law distinguishes it – in the US by the way.
So here’s what the IRS says…
“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done.”
There are a whole lot of specifics outlined within the IRS guidelines on what differentiates an employee from an independent contractor, and again, go look at their website with that description so I’m not wasting your time repeating it all here…
But to sum it up, if you in any way want to tell a worker WHAT they can do, HOW they can do it, WHEN they can do it, what they can CHARGE, what EQUIPMENT or SUPPLIES they’ll use, or if their work makes up a “KEY ACTIVITY” of the regular business of the company (you know like performing massage for a massage business), then that person legally needs to be classified as an employee and all the appropriate taxes, withholdings and such managed accordingly.
Sorry to burst your bubble if you weren’t aware of this.
Ok, now let me put in a caveat here; I am fully aware why many business owners classify their workers as independent contractors; most often so they don’t have to worry about withholding taxes, paying into social security, medicare, worker’s comp, and all that, I get it. I also get that if both parties are well aware of the law and both are comfortable proceeding in a certain direction, then that’s their choice. But to be clear, there can be consequences to that choice so know what you’re getting into when workers are misclassified, ok? And no, a contract, I don’t care how well it was written and that it was signed or whatever, a contract doesn’t trump tax law.
Alright, now for my reasonings beyond that clear IRS distinction and legal requirement…
For me, it really all comes down to this singular concept:
As the owner, when you have independent contractors, you have no real control and no recourse if those independent contractors choose to do their own thing and completely go against what you do as a business. So as I said, you can’t dictate anything they do really; only the outcome of the work, not the work itself or anything else about it. So they can charge double what you do, or half of what you do. They can perform any modalities. They can work whatever hours they want. They can no-show clients. They can show up late. They can wear whatever clothes they want. They can establish their own brand completely different from yours. You don’t get a say in it…at all. And yeah, people renting a space from you, fall into this relationship setup as well.
And this is why I personally think, if you are going to take the plunge and bring on any other massage therapists or other professionals into your business, unless you are just renting out space and want to be completely hands-off, and you don’t really care all that much what they do, if you want to have any say in any of the things they do, you need to have them classified as an employee. And yeah, that means withholding taxes, and paying into medicare, social security, worker’s comp, and all of those things. It means a bit more in accounting costs. And yeah, they’ll often make less on the front-end because you have to incur so many more costs to having employees you can’t pay them like you would an independent contractor, but as an independent contractor they have to pay self-employment tax so it pretty much comes out in the wash AND you get to keep control of everything. Call me a control freak, but if I’m running a business, I want that business to operate how I want it to.
So while I understand the reasoning for having independent contractors, in my opinion it is a much wiser business decision to have employees in our industry.
And if you’ve got employees (or independent contractors) right now, go check out the Finance & KPI Tracker I just launched that lets you keep track of and see all the sales, expenses, and the metrics of your business as a whole and each individual therapist in an easy-to-use spreadsheet.