Should I hire employees or independent contractors?
Key differences
Employees work for you: you set their hours, provide training, and they're on your payroll with taxes withheld. You're responsible for workers' compensation, unemployment insurance, and possibly benefits.
Independent contractors (ICs) are self-employed. They control how they do the work, often have their own tools, and can work for other clients. You pay them gross, and they handle their own taxes. You don't withhold taxes or provide benefits.
The IRS and state agencies look at factors like behavioral control, financial control, and the type of relationship. Misclassifying employees as ICs can lead to back taxes, penalties, and lawsuits.
- Employees: you control schedule, provide training, withhold taxes.
- Independent contractors: they control schedule, use own tools, handle taxes.
- Employees cost more in taxes and insurance but offer more control.
- ICs are simpler for short-term or specialized work.
- Always check state and federal guidelines before classifying.
Which is right for your venue?
If you need staff to work specific shifts at your venue under your supervision, they should be employees. This is common for servers, bartenders, and cleaning crew.
Independent contractors work well for specialized, short-term needs: a photographer, a DJ, or a security company. They bring their own equipment and expertise, and you don't manage their day-to-day.
Some venues use a hybrid model: core staff as employees, and specialized roles as ICs. But be careful—if you treat an IC like an employee (e.g., set their hours, require uniforms), you risk misclassification.
Common mistakes
- Assuming you can call everyone an independent contractor to save on taxes—misclassification penalties are severe.
- Not having a written contract with independent contractors that specifies they control their own work.
- Treating ICs like employees by setting their schedule or requiring them to attend staff meetings.
