Should You Hire Trainers as Independent Contractors?
Hiring an employee for your sports academy is no simple task.
There’s a lot of paperwork to fill out, regulations to learn, and decisions to make about salary and benefits.
Instructors and trainers are essential to most of our facilities, but sometimes it’s much easier to hire them as “independent contractors” than official employees. As the name suggests, independent contractors operate mostly independently of your business and are contracted to do a specific job that they control.
There are fewer taxes to pay, no taxes to withhold, fewer rules about hiring and firing, no worries about insurance – sounds like a good deal, right?
Be careful. If you don’t want to give the benefits a full-fledged employee typically earns, be prepared to lose a lot of control over how instructors operate at your facility.
The Risks of Hiring Trainers as Independent Contractors
Choosing to hire your trainers and instructors as independent contractors may put you at greater risk for a tax audit, and if an audit finds that you’ve been treating those contractors more like employees, you could get hit with plenty of fees, back taxes and other expensive legal headaches.
An audit isn’t your only risk; your independent contractors may decide that they’ve been giving you the benefits of an employee and deserve employment benefits – like worker’s compensation, unemployment pay, or retirement funds – and sue you to get them.
These aren’t hypothetical situations; they’ve happened to some of the sports academy owners who use my scheduling software. That’s why eSoft Planner refers to “staff” instead of “employees” throughout the system – to keep instructors from using it as evidence that they were being treated as such.
So, how do you avoid the unnecessary expense required of hiring a full employee while also protecting yourself against the risks that come with classifying your staff as independent contractors?
Start with Good Legal Help
The best strategy to avoid this scenario is to consult with an employment lawyer, ideally before you make any hires. Make sure that the lawyer you work with is familiar with the practices in the state you’re operating in, and ask specifically about how you could protect yourself in the case of potential lawsuits or audits regarding independent contractors.
Independent contractors won’t need to sign an employee handbook, but it might be a good idea to have them sign an independent contractor agreement that clearly states that they won’t be getting the benefits of full employment.
Err on the Side of Less Control
The legal definition of “independent contractor” varies by state, but it generally means that although the business can dictate some aspects of their work, they mostly operate independently. That typically means they provide their own insurance, do their own taxes, bring their own equipment, make their own hours, etc.
To find out more about the specific differences, check out the IRS web site. The U.S. Small Business Association also has a helpful page explaining the differences between an independent contractor and an employee. However, talking to an in-state lawyer will get you the best results.
Generally, if your instructors are independent contractors, they should be developing their own lesson plans and setting their own schedule. They shouldn’t have a boss or a supervisor.
Consider Renting or Subleasing to Instructors
I’ve mentioned before that too many sports academies make the mistake of relying too heavily on rentals for their income. Group programming options such as classes, camps, and tournaments, are much more profitable. I’ve also mentioned that keeping control of your own scheduling helps you gather much more marketing data and track who is in your facility at all times.
However, businesses that want to skip all the legal worries of hiring instructors all together (either as employees or contractors) may be better off simply renting space to them. This won’t be ideal for businesses whose instructors’ services are the main draw (speed schools, small personal training gyms, yoga studios), but it’s certainly possible to run a profitable business with most of your income from rentals if you plan it right.
You can make it even more attractive for instructors to rent from you by giving them special rates for bulk rentals, or unlimited use of a certain space in your facility for an upfront monthly payment.
Do you have any experience hiring sports academy instructors as independent contractors? Please leave a comment below.
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