Employee or Independent Contractor Presented to HIREDTEXAS July 19, 2016 Hiring On

HIREDTEXAS Mission People Helping People through Career Transition…. 2

My Objectives for Today To help You through your career transition: By looking at the employment laws from your point of view To make sure everything being done is legal You're getting what you should for the type of worker you will be 3

Agenda What Makes an Employee an Employee What Makes an Independent Contractor an Independent Contractor Federal Tax Implications for You The New Federal Labor Standards Act (FLSA) Rules Wrap Up 4

5 Is Determined by the Law Employment Status….

6 Common Law Employee IRS 3 Categories 1.Behavioral 2.Financial 3.Type of Relationship The 3 Factor Test Test A: Control or Direction of the Work Test B: Outside Service Test C: Independent Business or Trade Independent Contractor

7 Texas Workers Compensation Act Section (2) Independent Contractor is defined as "a person who contracts to perform work or provide a service for the benefit of another & who ordinarily: A. Acts as the employer of any employee of the contractor by paying wages, directing activities, and performing other similar functions characteristic of an employer-employee relationship; B. Is free to determine the manner in which the work or service is performed, including the hours of labor of or method of payment to any employee; C. Is required to furnish or to have employees, if any, furnish necessary tools, supplies, or materials to perform the work or service; D. Possesses the skills required for the specific work or service."

8 Common Law Employee Texas Workforce Commission 20 Factor Test Handout Employment Status – A Comparative Approach

9 You Make the Call Steve a computer programmer, is laid off when Megabyte downsizes. Megabyte agrees to pay Steve a flat sum to complete a one-time project. It is unclear how long the project will take and Steve is not guaranteed any minimum payment for the hours spent on the project. No instructions are given to Steve other than the specifications. A written contract is executed saying Steve is an independent contractor and is responsible for paying all taxes on the fee. Steve works at home his own computer.

10 Federal Tax Implications Independent Contractors You are in Business!! Receive 1099s File Schedule C File Schedule SE (Self-Employment Tax) Part of Your Form 1040 Responsible for Estimated Tax Payments

11 Federal Tax Implications Employees Receive W-2s Wages Reported on Form 1040 Employer Remits Taxes Withheld

12 Fair Labor Standards Act (FLSA )

13 Misunderstood Provisions of FLSA Exempt versus Non-Exempt Status Overtime Pay Exempt can be paid Overtime as an employer fringe benefit Payment of Wages Equivalent To At least federal minimum wage per hour $7.25 Federal / Texas = $7.25 $22.83/hr = $913 per week which is $47,476 annually Effective December 1, 2016 Currently $455 per week Know your State law limits

14 Exempt Employee (“White Collar”) Executive Professional Highly Skilled Computer Professionals Administrative Outside Sales

15 Non-Exempt Employees (“Blue Collar”) Any employee who does not fit the exempt category is automatically a non-exempt employee Usually receives an hourly rate Job duties are routine, specific set of rules and/or standards Examples of non-exempt employees are maintenance and construction workers clerical staff laborers technicians

16 Exempt Or Non- Exempt? JOB DUTIES NOT JOB TITLE Compare to the FLSA standards

17 Fair Labor Standards Act (FLSA) Requires that most employees be paid “overtime” for hours worked in excess of 40 hours in a work week … Overtime = excess of 40 hours in a work wee Overtime = one and one-half times “regular rate of pay” Regular rate of pay = includes all remuneration except Discretionary Bonuses

Wrap Up 18 Questions Or Comments ?

Thank You! 19