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Help with becoming an Independent Contractor
Roz
Boss ofInternetRegistered User regular
Boss ofInternetRegistered User regular
Hey guys,
An ob/gyn office has been trying to actively recruit my wife to work there for the last 6 months. She's finally gotten fed up with her current job and is thinking of switching. She knows some of the doctors there already and everything seems on the up-and-up, the only problem is that they want her to join as an independent contractor. We're both unfamiliar with IC work, and want to make sure we have a fuller picture before we agree to anything. So far they've told us that she won't be getting a 401k through them, or health benefits. We're on my company's health plan anyway, and we can roll her 401k into an account through another provider, so those don't seem like huge issues.
They are going to pay her per patient, which seemed a little iffy, but we checked with two people who work there and they say that the work is steady.
Is there anything else we should be aware of? Any tax concerns or other "gotchas" we might be missing? It seems like a really good opportunity for her, but we don't want any negative surprises 3 months down the road.
Thank you for your help.
An ob/gyn office has been trying to actively recruit my wife to work there for the last 6 months. She's finally gotten fed up with her current job and is thinking of switching. She knows some of the doctors there already and everything seems on the up-and-up, the only problem is that they want her to join as an independent contractor. We're both unfamiliar with IC work, and want to make sure we have a fuller picture before we agree to anything. So far they've told us that she won't be getting a 401k through them, or health benefits. We're on my company's health plan anyway, and we can roll her 401k into an account through another provider, so those don't seem like huge issues.
They are going to pay her per patient, which seemed a little iffy, but we checked with two people who work there and they say that the work is steady.
Is there anything else we should be aware of? Any tax concerns or other "gotchas" we might be missing? It seems like a really good opportunity for her, but we don't want any negative surprises 3 months down the road.
Thank you for your help.
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If it isn't like 150% of what she's currently making they're screwing you over.
You're responsible for your own payroll taxes and employer contribution, so SS and medicare are like a 15% thing instead of a 7.5% thing. Now add in lack of health benefits or retirement benefits, no sick days, no vacation days and then add on top of this Sunday that if they just stop giving you enough work you're just sorta screwed as far as UI goes (I think, not sure on this last bit.)
Now ask if she'll set her own hours, provide her own computer, medical software, charting and all that jazz. If the answer is no, she's probably not legally an IC, if the answer is yes that's even more money you're paying for the Doctor's business.
Really the 150% is just a complete bullshit sniff test. If it isn't there it's not an offer but an insult. Even well above that it could be a horrible idea depending on the benefits she would normally get.
Roughly 25-40% of your income immediately is taxed, depending on how much you're making, because you now have to cover all the employer side taxes, also your own taxes. You also have to pay taxes quarterly. 40% should cover 'both'. Then you need your own health benefits (find out what the most comparable to your current is on the exchange and figure that into the monthly income). Most 'good' health insurances through the exchange are something like $300-600 a month (gold/silver plans).
If you're making $30,000 now, as a 1099 you should shoot for roughly 70k to have the same standard of living.
Contractors also work based on goals. You should lay out exactly how much work you expect from them. If they're paying you per patient, she should say how many patients she expects to get a week at a minimum, and how much she expects to get paid per patient, at a minimum. Going over is fine, going under means her obligations to the contract are null and void. This will let you set the expectations to meet that minimum salary to stay where you are. Edit: also she needs to be setting her own schedule, so while they supply the work load, the wife gets to decide when and how often she works, so long as she meets the minimums. She should also be available during the day, even if she's not working, in case there's meetings or phone calls.
If they balk at any of this, they're trying to screw you guys over.
The reason I was talking about health insurance is because employer provided insurance is absolutely part of your pay. Places that are being honest would pay you if you don't use their health insurance as it does save them money. (It isn't a 1 to 1 thing as employers get tax benefits for health insurance but it is still a part of what they spend to employ you.)
Some health insurances in NYS require your spouse to have their own insurance through work first before they can be added on to your own.
Not sure if that's applied to every state, but my insurance specifically requires it.
Thanks HDHP!
I've done 1099 work before, and you should be able to set goals and never clock in and out. If they have their contractors punch in and out, that is tragic. Same with telling contractors how to do their job and when to show up. Treating employees as contractors is a dangerous proposition. That company is one disgruntled employee/contractor away from bankruptcy. 5 years of taxes unemployment insurance overtime minimum wage requirements penalties fees. The longer they are in business the more at risk they become. It only takes 1 call to the state labor board and a follow up from a bored Govt worker and everyone loses their job. There is a huge risk as a 1099 more than just the usual if your fired you have to fight for unemployment.
as many have pointed out, signing on to be an IC should come with a massive pay boost for what you're giving up in terms of stability and benefits.
As mentioned, you also immediately become ineligible for things like unemployment benefits if they decide to stop sending her patients.
Someone, I think SKFM, mentioned in another thread somewhere that it is pretty common for doctors to do the IC thing, because it allows them to abuse some sort of 401k/IRA contribution limit loophole. So you know, if they are offering her like 200k+ a year, maybe the IC thing is for her own good.
Something tells me it's more like, "We're willing to offer you $20 an hour, since you're making $15 an hour, we feel this is a sizable and fair offer"
But as a 1099 worker, $20 an hour is more like $8.
I think that was the Doctor himself was technically a IC at their own practice.
Well, just as an example, if she makes 40 dollars an hour, they are willing to pay her $50 a patient. She can do one patient in 30-45 minutes typically. I'm trying to get them to write in a minimum amount of patients per week, and they seemed agreeable to it, though it was only 25-30. That said, from the information I've gathered, it is a busy office. She could consistently have 10-12 patients per day but they aren't willing to guarantee that high.
They've also included a non-compete provision in the contract that I really don't like and I think it's overly broad. I'm going to hire an attorney to see how enforceable it is and to get better language. I can understand them wanting to protect themselves so that she doesn't induce other people to leave the company or steal business from the employer, but at the same time, she can't help it if her patients want to follow her should she go to another practice.
EDIT: Also, based on the numbers, they're lowballing her. If she makes 40 an hour now, she'll need to roughly see 13-15 patients a day to equal an 8 hour workdays pay as an employee. So to equal her 8 hour salary, she'll probably need to work 10 hours a day there.
It should be $150 a patient and 10 patients a day, minimum. If they can't guarantee it, then it's $200-250 a patient.
Non compete is a no go, do not sign a contract with a non compete.
NDA and HIPAA are okay, non compete makes you an employee.
http://www.strasburger.com/independent-contractor-sign-noncompete-never-ever/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
That means 25% comes immediately off the top of the income. $50/hr means she's really only making about $30 an hour, and that's before you even factor in costs like computers, electricity, pens, paper, health insurance, retirement contributions, your actual taxes, etc.
Normally I'd say negotiate but it's clear the practice is just setting itself up to get utterly fucked on taxes if the IRS ever gets involved. I would not want to hitch my wagon to them.
Ask me how I know.
fuck up once and you break your thumb / if you're happy at all then you're god damn dumb
that's right we're on a fucked up cruise / God is dead but at least we have booze
bad things happen, no one knows why / the sun burns out and everyone dies
I agree with the thread, that I wouldn't do IC unless they can provide appropriate compensation and then really only if she is also wanting to do IC elsewhere, otherwise it's just not worth the headaches. If they balk at compensating enough then I guess they really can't afford her services.
She was looking at a couple of different job opportunities and this IC job was something offered to her back in feb/march. She turned it down initially. But with the way work was going she was considering it. Now with all of your feedback, I get the sense that this is not right for us at this time. The money doesn't seem worth it given all the other factors. I'm going to encourage her to not take this position and hopefully we can find something elsewhere.
Thanks everyone!
But there is no way that kind of employment is even close to something an IC would do. She doesn't provider her own schedule, she doesn't provider her own tools, etc.
I would feel terrible if a lot of people lost their jobs, but, that's something the IRS should find out about, because holy fuck.
"OK, so you'll need to bring your own ultrasound machine, you can use the service entrance..."
You (she) should run away and not look back. Either they're incompetent or malicious; neither makes a good employer.