Entertainment firms have many decisions to make regarding how their companies are run; whether to lease or buy a building, how to manage accounting functions, and human resource management just to name a few. One big decision is deciding between the option of hiring employees or using subcontracted professionals to manage work flow. There are pros and cons to each one. Our hope in this article is to provide you with information to help you through the process.
Many times entertainment firms need to hire independent contractors as jobs are only for the period of the production or event. Your entertainment insurance and workers’ compensation should address these coverage issues.
Advantages of hiring an employee
- Employees can sometimes take on multiple roles within the firm.
- Work flow and managing projects can be more effective with an employee.
- Employees will have strong loyalty to the business which can result in increased productivity.
- It is easier to manage employees, as the business has more control. Independent contractors will have other clients to report to and manage.
- With employees, your costs can be fixed to some degree. Independent contractor rates will vary depending on market demands.
Advantage of using an independent contractor
- No health benefits need to be paid to a contractor. Health costs can add over $5,000 annually to the per employee cost.
- Your cost tends to be focused on specific tasks or projects.
- Ability to have work on demand. Many small businesses may have seasonal needs or business work flow that is better suited to an independent contractor rather than another full time employee.
- Reduced overhead. With a contracted employee, businesses don’t have the added costs of phones, workers’ compensation, computers, training, benefits, and payroll.
- You will have less management responsibility with an independent contractor.
- Depending on the functions, independent contractors may have more skills and training giving you the same advantages as larger firms.
As you consider this topic remember that there are tax and legal issues you should consider. We recommend you consult with professionals for specific information. A few final thoughts:
- If you hire an independent contractor just to get around benefits and legal issues and the contractor works exclusively for your firm, they may not be considered truly independent.
- Under workers’ compensation laws, if you control the person and work to a large degree, you may not be able to avoid responsibility. Check with your insurance agent.
- Depending on the function, you may want the independent contractor to have professional liability insurance.
- We recommend you have a written agreement with the independent contractor which should outline all legal issues.
- The IRS uses 20 factors to determine if a worker is an employee or an independent contractor. However, it is their interpretation (although it could be challenged). Not all factors apply in each case or carry the same weight. http://www.uncsa.edu/formsprocedures/IRS.htm
We are proud to offer specialized coverage for production and event insurance of all types. MovieInsure.com offers a wide variety of A-rated, Admitted and Non-Admitted insurance companies for our clients to choose from. We only deal with companies that are on the Insurance Commissioner’s approved list.