Author: Robin Noah
Executive Coaches of Orange County
No question these are very difficult time for most businesses. A major challenge is how continue operating within existing financial parameters. There are no rubber bands to stretch the budget; restructuring, reducing and cut backs are some of the issues business persons are facing. What has to be cut and where do you cut? One of the primary areas always looked at for making changes is the overhead costs. For most business the first stop is payroll. Cut or reduce payroll and you have personnel issues.
When dealing with personnel issues one needs to be concerned with labor laws. What may seem like a good decision may really be a costly action. For example if cutting back wages is an option you choose to exercise be sure that the basic minimum wages level is maintained for both exempt and non-exempt employees’. When reducing exempt employees’ salary, remember that falling below statutory minimum salaries is a violation of state and federal codes.
Another option that is considered is using independent contractors which would reduce the cost of benefits and overtime pay since independent contractors are self employed and receive no “benefits “from the business they contract with. Independent Contractors (IC) are responsible for their unemployment insurance, workers’ compensation and state and federal income tax.
The time bomb here is that simply calling someone an IC does not make it a legal classification. The most important factor is that the business has no control over the IC; the IC has the right to control the manner and means of accomplishing the desired result. The www.IRS.gov web site provides information for making the correct IC classification determination.