employees vs independent contractor

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dharber

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Marshall, TX
Hi, I have been working for a GC who has made a suggestion to me. He pays his guys by the job not per hour. Claims that he gets much more productivity out of them. Recommends that I do the same. I understand how this would help productivity, the faster they get the job done the more they could make. He has them sign contracts for time allowed and quality of work. This sounds to me like working them as independent contractors. Has anyone done this in our trade? Do you think it would work? I have one Journeyman and several apprentices. I would only do this with the Journeyman. I let him pretty much run the job anyway.
 
there is nothing wrong with piece work. its is a very fair approach for both employer and employee for work that can be readily quantified.

IMO, they are likely to still be employees for tax and all other purposes.

if your guys are union, it probably won't be allowed.
 
You better check with your state Dept of Labor and Industry or whatever department oversees laws governing this. Here in Pa you cannot pay an employee by piecework only. You can pay them minimum wage with an incentive program but their entire gross wages get counted for unemployment taxes, workers comp etc. Although you may increase your productivity your financial liability will still be there.

Sub contracting is another area where you should be careful. Besides the state requirements which are sometimes more restrictive, the IRS has guidelines that will determine whether they are a legitimate sub contractor. It used to be that they had a list with about 14 or 15 qualifiers and you had to meet, I believe 7 of them to qualify. These included but were not limited to, Business checking acct, tax ID no, liability insurance, their own truck and tools, no direct supervision, their ability to come and go as they saw fit on the jobsite etc.

This has always been a pet peeve of mine. While trying to comply with all of the requirements, the workers comp, unemployment, FICA etc. competing with somebody paying their guys as subs and putting me at somewhere around a 25% labor disadvantage when bidding those jobs.

FRANK
 
and what does he do with his "signed contract of quality of work" when there is a problem with the installation??? piecework has been around for many years and i have never seen it work as expected. and i'm not talking about the electrical trade. at first everyone liked it, but then human nature shows up and the problems begin. then it was a way to get around paying taxes and insurance by making employees individual contractors --- the IRS put a stop to all that. it would be very risky to consider it in the electrical field !
 
productivity

productivity

Productivity is the only reason I am considering piecework. I am also considering some kind of bonus plan for getting jobs done on time. I am a small contractor, 2 crews and I am one of them. Just want to be as productive and profitable as possible.
 
It can also backfire on you. Since they make the same whether they take 3 days to do a job or 5 days, and if it doesn't matter to them, you just lost two days.
 
The best way to get more productivity is to hire productive people then pay and treat them well. The practice of calling employees "sub contractirs" has been around for a long time the ones that get caught face fines and penalties as well as legal action.One local GC did this for years then one of his "subs" was killed in a jobsite accident which brought in OSHA and his activities were put under the microscope and now he is facing several federal tax evasion charges.
 
as an employee I would be gone as fast as I could change jobs..I view that as a way to side step real employee issues..if you think my production or quality of work is lacking talk to me..It might be a quality of leadership as well..I would be more into the incentive plan myself but once offered would be expected regularly so watch the jobs you offer it on..and remember incentives come in many forms..just dont get yourself in trouble with the big boss the IRS..
 
piecework/comission/unit rate/etc DOES NOT equal sub-contractor...

it's a perfectly legal way to operate (as long as you follow the laws - just like anything else)

the difference with this vs. hourly is you can better plan your costs and if done right, offer a better price (since you don't have to cushion the labor in case a guy gets sloppy or lazy)

a properly executed piecework plan is better for everyone - especially the employee
 
In NC each worker must be a bona fide employee. Not sure about where you are. I guess you could sub the work to licensed ECs, but that would seem more costly. I know I would charge considerably more to work as a sub than I make hourly. For what it is worth, I work just as hard as I would now as I would per job because if company makes money he can afford to pay me more.
 
emahler said:
piecework/comission/unit rate/etc DOES NOT equal sub-contractor...

it's a perfectly legal way to operate (as long as you follow the laws - just like anything else)

the difference with this vs. hourly is you can better plan your costs and if done right, offer a better price (since you don't have to cushion the labor in case a guy gets sloppy or lazy)

a properly executed piecework plan is better for everyone - especially the employee
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These are legal but you must follow labor laws which many employers do not.if you run into a dispute with an employee over pay you may end up paying back wages owed if you do not follow the law to the letter.
 
Rewire said:
These are legal but you must follow labor laws which many employers do not.if you run into a dispute with an employee over pay you may end up paying back wages owed if you do not follow the law to the letter.
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same as hourly....just because someone can't follow labor laws doesn't make the system inherently bad...
 
considering the electrical trade -- there are too many negative issues facing the electrical contractor. now, a drywall contractor is different. the guy hangs 100 boards and you pay him, not too much guesswork there. easy to track and his work is in place. electrically, it's more of a task to track "who did what" than it would be to properly supervise the installation.

we all have our ideas on what constitutes a day's work and we also know that there are days that things happen which increase and also decrease a job's productivity! and some of these things are totally out of our control. consider the problem when you have a crew of men that run out of a certain material because of a backorder or can't work in a certain area because of a job condition. it gets like a tug-a-war!

a qualified happy crew is the most productive method from my viewpoint. provide a qualified man the layout and material with good working conditions and he should produce to maintain his job security !! there's something about self pride that enters into this formula. take a good worker and limit his output somehow and he will quickly become none productive. my men always had an attitude that they were the best and could out do any other contractor and i guess that comes from self pride. and we could always take any job and make decent money on it...

when i hear contractors talking about piecework, it tells me that contractor doesn't know how to supervise and keep his men happy --- a happy man is a productive man...........
 
when i hear contractors talking about piecework, it tells me that contractor doesn't know how to supervise and keep his men happy --- a happy man is a productive man...........
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I suspect the hourly versus piecework debate will never be resolved. I don't think it matters much what business or profession one is in.

Drywallers run into the same kinds of issues as electricans do as far as not having the parts, scheduling, conflicts with other trades, etc.

A lot of car mechanics have been on piecework basis for many years. The relaly good ones like it becasue they are often able to make far more then on an hourly rate. yes, sometimes they run into issues that slow them up and make the piece rate less than what a straight hourly rate would be, but in the long run that is not typical.
 
depends on the type of work you do...big difference between resi service and a 100 man new construction project...

something to keep in mind... anytime you do a project for a fixed price, you are working piecework...
 
petersonra said:
Drywallers run into the same kinds of issues as electricans do as far as not having the parts, scheduling, conflicts with other trades, etc.
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Bob if you were in the electrical trade you would know that drywallers are possibly the best example of why you wouldn't want piece work in the electrical trade. All you have to do is look at the quality of the work done by most drywall contractors ( don't worry finishers will get it and paint will cover it, the electrician will find those boxes ).

The last time I saw a real quality job done by a sheet rock crew they were paid hourly, they were a union shop ( so they were paid well) , they were very fast and they were very efficient and they did top quality work. They were actually a pleasure to work with, not a box covered and none of their crew showed up drunk are stoned ( as far as I could tell ). :wink:
 
I have been around a few companies that did this.

Being polite I will say the quality of work was CRAP. And the employees loyalty was CRAP.


I am an owner an "ELECTRICAL CONTRACTOR" I want employees, I hire subcontractors for specialty needs rigging, core drilling, ECT... The professionals electricians I hire and provide them with a FULL TIME JOB, BENEFITS, HOLIDAYS and VACATIONS. Can't say enough about how CHEESY this sounds.
 
Sure are a lot of differing opinions, I am glad to hear input from both sides. I agree that a happy employee is a productive employee. I really try to pay well and provide good equipment and working environment. I have been in business for just under 3 years and have done ok. I am to the point now that I want to start making money and not just get by. I have plenty of work and want to increase manpower, thats why I am now looking at improving productivity. After reading the posts I am feeling like a good incentive plan and good leadership may be the best route to take. Thanks for the input.
 
I don't know if the laws in Texas have changed since I contracted there. But at that time you could only contract an individual for 6 month of the year to do electrical work. Any more and you would face tax penalities.
 
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