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A Pre-Employment Horror Story

Yesterday I spoke about the importance of pre-employment screenings.  Not to scare anyone or to have you think you are hiring the next “postal” worker but it should be taken seriously.  As an owner one must take precautions to ensure the safety of not only the stakeholders within the organization but also to anyone who comes in contact with that organization, vendors, customers, etc.

Case in point, what if your business suddenly picks up and you need to hire several new customer service reps to handle the  new volume of business.  You place an ad, receive a multitude of resumes and start the interviewing process.  You find the perfect person, they are well groomed, well-spoken, and have the perfect background experience . . . just what you are looking for.  In fact, you’ve fallen in love with them and hire them on the spot.  Good move?  No!!!!

In most cases it doesn’t take more that 24 hours to perform a thorough background check on that person.  You then have peace of mind knowing you’ve done your due-diligence and you have protected your business and all concerned.

You ask, “What about the Horror Story”?  OK, here goes:

This happened to John (names have changed to protect the “not so innocent”).  He needed to hire a customer service rep because business had consistently picked up and because of the overtime it was costing him.  He found the perfect guy (Steve) and hired him on the spot.  A week later he got a call from one of his customers stating that Steve “flew off the handle” when John called about an error on a recent order.  The customer knew that John stressed the importance of superior customer service and wanted John to be aware of the unusual behavior.

John called me to ask how he should handle the situation.  We asked about background screening and John said he didn’t have time.  We then conducted a “post hire” screening to discover that Steve had several counts of domestic violence charges all stemming from a “short temper”.

We discussed the results with John and he was not willing to give Steve a second chance based on the results of the report and his behavior with one of John’s customers.  Because Steve was within his 90 day introductory period, we advised John to terminate Steve immediately as he was within his introductory period and to state that Steve just wasn’t the right fit for the position.

John was fortunate because his customer cared enough to report Steve.  What would have happened to John’s business if the customer did not report Steve?  Take the time to check the backgrounds of those you hire, it will save you in the long run.

Don’t have time to do it yourself? Use a third-party vendor.  We’d be happy to assist you.

The Importance of Pre-employment Screening?

How honest are applicants on their resume?

What are good pre-employment screening procedures?

Pre-employment screening is more common these days than ever before. It’s estimated that over 40% of resumes can contain false or ‘tweaked’ information.  Employers want to insure that what they are getting in an employee is what they were promised.  The employer may perform a reference check to find out whether an applicant actually graduated from the college they said they did or to confirm that they worked at their previous employer(s) during the time stated on their resume or job application.

Employers need to know who they are hiring and they have a duty to their stakeholders and co-workers to keep everyone as safe as possible.  Background checks typically include both a criminal and credit check on the potential employee.  Finding out the truth about someone using a background check is quick, inexpensive and allows an employer to take the guess work out of hiring.

Do you know who you just hired?  Do you REALLY know who you just hired?

July 4, 2011 No Comments

So You Think You Can Make Them Independent Contractors?

You may want to think twice about doing it!

The Internal Revenue Service has strict guidelines defining the difference between an Independent Contractor and an Employee.  It is estimated that over 3 million workers are illegally misclassified as Independent Contractors.  This is costing the Federal Government an estimated $300 Billion in tax revenue annually due to this misclassification.

100 New Agents to crack down on small businesses.

Earlier this year, President Obama agreed to fund an additional 100 IRS agents to assist in cracking down on the misclassification of workers.  It is estimated that this initiative will generate an additional $7 billion in revenue over the next decade for the US Government.  This audit will affect 6000 businesses.  Now is the time to evaluate your employment practices and ensure you have properly classified your workers.

Double Whammy – States join the Feds.

States are joining the feds in this initiative and are sharing information resulting from audits.  One governing agency conducting an audit can cause a domino effect on the offending business.

Cutting costs illegally.

Because of the economic times, businesses are looking for all ways to reduce cost.  Many companies are using outsourcing as a way to reduce payroll costs.  This is fine if done legally, however the numbers indicate many businesses are not following the IRS guidelines for proper classification.  Businesses can save as much as 30% of payroll costs by classifying workers as independent contractors.  This avoids paying payroll taxes, unemployment insurance and worker’s compensation payments.  With unemployment at an all-time high, many states have exhausted their unemployment pools and are resorting to assistance from the feds.

Test to determine if you are legal.

In the past the IRS used a “twenty factor” test to determine whether a worker was an Independent Contractor or an Employee.  In 2006, the test was fine tuned and was reduced to 11 main factors categorized into three main groups; behavioral control; financial control; and relationship of the parties.

Behavioral Control shows whether there is a right to direct or control how the worker does the work.  The worker is an employee when the business has the right to direct and control the worker.  The business does not have to actually direct or control the way the work is done – as long as the employer has the right to direct and control the work.  Examples are if the worker receives extensive instruction such as how, when or where to do the work, what tools or equipment to use, what assistants to help with the work or where to purchase supplies and services.  If these situations exist, the worker is an Employee.  If the business provides training on procedures or methods and that the work is to be done a certain way, the worker is more than likely an Employee.

Financial Control shows whether there is a right to direct or control the business part of the work.  If the worker has a significant investment in the work they do, they may be an Independent Contractor.  If they are not reimbursed for some or all business expenses, they may be an Independent Contractor.  If the worker has opportunity for profit or loss, this indicates there is a viable business and could indicate that the worker is an Independent Contractor.

Relationship of the Parties illustrates how the worker and the business perceive their relationship.  If the worker receives benefits such as insurance, paid time off or pension, the worker is an employee.  If a written contract exists showing the relationship between the business and worker, Independent Contractor status may be appropriate.

Employee Status

When a worker is classified as an employee, the business must withhold income tax, social security and medicare taxes.  The employer is also responsible for their share of social security, medicare as well as unemployment taxes.  Employees are issued a W-2 Wage & Tax Statement.

Independent Contractor

When a worker is classified as an Independent Contractor, the business is not required to deduct or pay any taxes on the worker’s behalf and issues a 1099-MISC, Miscellaneous Income report.  The Independent Contractor is responsible for all payroll taxes both their own income tax as well as the self-employment tax.

Need some advice?

For more information on worker classification, assistance with a determination or a checklist to determine the status of a worker, contact us today!

 

July 4, 2011 No Comments

Taking a hard-working employee for granted

This morning I had a conversation with a friend who is someone I greatly admire. She is married, mother of three, has a professional career, is active in her church, is involved in several professional organizations, is working on her graduate degree and manages to be a good friend at the same time. It got me thinking, how is it some people keep many balls in the air at one tine while others cannot even manage one simple task?

Now here’s the clincher. She told me today that her employer feels she is not giving the company her all. They have said that her days with them are numbered. They would not be disappointed if she were to leave the company.

In looking at her accomplishments she has created a department that did not exist prior to her joining the organization. She has managed to save the company hundreds of thousands of dollars in potential penalties and fines by bringing them in compliance. She has implemented several cost savings programs and has maintained existing programs, keeping the company competitive. In essence she has done what normally would have taken a huge staff to do all by herself. Why are they not happy with her?

You see she gets more done in a half a day than most people get done in a day and a half. Because she gets more done in a short amount of time the expectation is for her to do more. I understand this philosophy. We all have the expectation that no mater what you accomplish if there is time at a the end of the day, then you should do more. On the other hand, how many times have we heard “I am getting paid to do a job, not to work by the hour”. What is correct?

There needs to be a happy medium. When someone has a gift of getting way more done than others, it should be recognized. People should not be punished for excelling in what they do. I know I have been blessed with that gift. Although not necessary, it is nice to be recognized for it once in a while. A thank you, a kind word goes a long way. It makes you want to give more when you are shown appreciation. So I ask you, today, recognize someone who has that special gift. Let them know you appreciate them. Don’t make the same mistake my friend’s employer did. They are losing one heck of a great person.