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Pay Rolling Independent Contractors

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Pay Rolling

This concept is closely related to employee leasing. In pay rolling, a company may recruit, interview, and select individuals to work at their firm but places those individuals on the payroll of an outside service. Organizations that use the pay rolling concept usually do so for workers employed on large projects of limited, but long-term, duration, for example, paralegals working on a large document case.

For the person being pay rolled, it is simply like working on a long-term temporary assignment. However, the advantage to the business is that pay rolling usually involves a charge of 20 to 25 percent above the salary of the pay-rolled employee, whereas the charge for a straight temp for the same work is likely to be 30 to 60 percent above salary. Many temporary help firms offer pay rolling projects at discounted rates as a special feature to their customers.

Independent Contractors

We could title this section "Temping without a Service." It is directed at those ambitious individuals who have the tenacity and the aggressiveness to take their knowledge of the temporary marketplace and turn it into higher earnings for themselves. It can be done very successfully, but don't allow yourself to be blinded by your potential earnings, since there are some disadvantages and you should be aware of them.

An independent contractor, also known as a free-lancer, is a self-employed individual; he or she is not on an employer’s payroll, and therefore, no outside source makes deductions for Social Security (FICA) or withholding taxes on his/her behalf. An independent contractor provides specific task-related services to an employer in accordance with the terms of his or her contract with the customer. Many temps are lured into independent contractor status because employers may pay an independent contractor a higher rate than they would pay a salaried employee. In addition, an employer may be willing to pay the independent contractor a higher rate than he or she would have received as a temp for the same job. Why? Because an independent contractor eliminates the middleman, in this case the temporary help service, which may be charging the customer a higher rate for the temp to cover the service's over head.

In addition to a higher income, many people pursue free-lance work in order to establish a special expertise or professional status within an industry. They find a niche and turn it into a successful business. Independent contractors also have the ability to take tax deductions as sole proprietor of a business. A few words of caution: There is considerable opportunity to violate the rules of this concept, and it is your responsibility to make sure you adhere to them. As an independent contractor:

You must assume all the financial risks and legal liabilities of owning your own business.

You are responsible for paying state and federal withholding tax and FICA contributions.

You must pay self-employment tax for FICA as both an employer and the employee.

You will be taxed on your business earnings, even if you do not consider it a salary.

You must estimate your income on a quarterly basis in order to make federal and state income tax deposits. If you underestimate your earnings, you may have to pay a penalty.

You are responsible for your own health coverage and pension plans.

We could go on and on about self-employment guidelines, but we suggest the best person to advise you is an accountant. Don't pursue employment as an independent contractor unless you feel well-versed in current law and setup procedures.

An independent contractor cannot free-lance without a special expertise and a market that will buy this expertise. You must have perceived value to an organization. Before you go out on your own, get a good overview of what you can offer your clients and who the real buyer of your service will be. It is essential that you be able to build your own client base; so you must not be shy about selling your services. Temps who have taken this route tell us that you should network with employers and working peers. One told us, "Temp through as many services as possible so that you are exposed to a wide variety of companies. Build a reputation and contacts."

Kyle O'Hara is a 28-year-old singer/actor living in Manhattan. Here is his advice for temping successfully without a service.

For three years I worked with two of the city's busiest services. I liked temping, but I knew I could make more money on my own... I knew my service was getting a healthy markup for my work. I decided to free lance when clients began telling me they would gladly pay me directly, and I knew there were enough of them to make me think I would be kept busy... I type one hundred eight words per minute, and I’m proficient on Wang, Syntrex, and Vydec [all word processors]. I also know personal computer software-MultiMate, WordPerfect, Lotus [1-2-3], and dBase.

I probably can fudge a few other packages, too-if I had to-they are all very similar... I used one of my head shots from my acting portfolio, and I had it printed on a postcard with my skills superimposed on the image. The back of the card was printed with my name, phone number, and the words “Need a temp? Call me direct." I sent them out everywhere... It started to work... That was four years ago, and business is still great. Of course, working independent of a service was more of a novelty then. I also joined a trade association; I never go to the meetings, but I use names in their newsletter when I want to send out new mailings... I drop out now and then to do summer stock and Off-Off-Broadway work; but when I get back to the city, I send out my cards with a big red stamp "He's back!" printed on my forehead on the post card... I have a base of about ten steady clients: that's all I need really. Most of my work is actually done at two main companies... I get a lot of referrals, but I send the business to other freelancers I know or some-times to my old service... More advice?, Well, keep accurate records, maintain a good mailing list, keep it updated with names, get permission to use personal references, don't be shy about making collections calls-sometimes trying to get paid is a drag-and don't have a wild message on your machine: Even if it's funny, you'll scare off business.
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