when I think subs, I think illegals. Though I have used a sub once to help wash a house and to clean the windows when it was done (it was a cleaning company). And he was a great, hard working, honest guy. I have something in my old contract that says I may hire subs and when people read that they say "you use subs?" in a disgusted tone. I think there is a bad connotation about sub contractors. Are subs not usually just normal contractors hired by you instead of the HO?
Using Subcontractors
There has been alot of discussion in the past couple of months about using subs. Brian and I have been going back and forth on the issue for quite some time and I had the pleasure to finally speak to him over the phone today reguarding the issue of subs. In the past I have attacked him on his use of subs and made some refrence that he was being dishonest. After talking with him over email and on the phone I feel asthough I should make a clear apology to him for any innuendo or claim that he had been decietful here or in his business practices. I still don't agree with what I have personally experienced with the use of subs, but I do have admiration for Brian for implementing systems into his company and making them work. I think it can work great and Brian and his systems seem to be a prime example.
I think there is a huge ripple effect from a company using subs irresponsibly. Irresponible to the effect of not paying taxes, not paying insurance, hiring illegals, ect, ect and anything else that could contribute to a contractor driving down prices. What are your feelings on the issue and have you lost work from the effects?
I think there is a huge ripple effect from a company using subs irresponsibly. Irresponible to the effect of not paying taxes, not paying insurance, hiring illegals, ect, ect and anything else that could contribute to a contractor driving down prices. What are your feelings on the issue and have you lost work from the effects?
1 - 20 of 23 Posts
I've talked with my accountant on using subs vs. hiring employees. His interpretation is that if I am telling them where the job is on a regular basis then they would be considered employees. Anyone else ever had this interpretation?
YesI've talked with my accountant on using subs vs. hiring employees. His interpretation is that if I am telling them where the job is on a regular basis then they would be considered employees. Anyone else ever had this interpretation?
They are supposed to read your mind as to where the next job is
Ok...just a little bit of humor...but that's a little loose of an interpretation by anyone's standards
I can't imagine your state is that strict
How the heck are they supposed to know which/what is next?
I'd have to say your bean counter is wrong on that one
I've talked with my accountant on using subs vs. hiring employees. His interpretation is that if I am telling them where the job is on a regular basis then they would be considered employees. Anyone else ever had this interpretation?
I was always told you could tell them where the jobs are just not control there daily hours. If your keeping track of there hours then they would be considered employees. Also in IL if the sub doesn't provide correct proof of Insurance they fall under the jurisdiction of being an employee and there monies will fall under you insurance audit
Since last August, I have done alot of advertising for employees. Out of dozens and dozens of calls, I hired a total of 4 people, 3 of whom stayed through the 90 day probationary period. I hired the best out of the pool that was available.
The other 95% of calls that came in was constituted by a few different categories of candidates. Most noteably, and somewhat surprisingly, the largest category was the call that lands on my answering machine that goes a little something like this:
"Yah my name's Mike and I live up in the Islands. Uh lets see I been self-employed in remodeling and painting for the past oh about 7 years. Real interested in talking to you about your opening. I got all my own tools, truck, staging, ladders, and I'd be willing to come on as a sub."
In other words, sure Mike, while I'm focusing on building a better business I will gladly bring you on board as a sub since you cant find any work of your own right now and when things pick up you can bail. No problem. And I'm sure you dont carry comp, so I will pick that up for you. Would you take $40 an hour?
I guess part of the ongoing sub/employee discourse on here has a regional component to it. In this podunk little state where I engage in acts of commerce, there are no big fish paint companies. So when someone rolls into Painttalk for a hit and run post in the middle of a serious thread saying that "all the best paint companies in (his) area use all subs lol :thumbsup: you guys take it all to personell lol :thumbsup:", that doesnt make much sense to me because I am a small fish in a small pond. NEPS is a bigger fish in a much larger pond. And we scratch our heads. But someone said it and I believe it just as much as I believe that someone can out cut me with his 4 inch cutting brush even though he hasnt been in the field very much in many years. Clearly, I digress. But in the end, many of us have good businesses and are part of the larger community.
I've used subs in the past, and without question, I could sit here for hours and entertain you with unbelievable stories about things that the subs did. It must be a reflection on the fact that we have such a small talent pool here in Vermont and so therefore not as many good painters available to us, but then I guess that would mean not as many bad ones either. I've seen, hired and fired my share of bad ones. We see it on here all the time, someone with some basic paint skills, no equipment and insufficient product and process knowledge has one "job" fall in their lap where someone will pay them $20 an hour because they wont pay a real paint company more than twice that, and a new sub is born. Then another and another. The posts pile up: "How do you gyus market?" "What advertizing work bestest?" "How do I price new contructoin?" Then we really confuse them and their customers by telling them that they need to charge $40/hr when they arent worth 12.
Ultimately, there are successful paint companies and not so successful ones. There are a few roads we can take to get there. As JTP said, we take the road that suits us best, or something like that. What matters most is that the good and legitimate companies get there.
The other 95% of calls that came in was constituted by a few different categories of candidates. Most noteably, and somewhat surprisingly, the largest category was the call that lands on my answering machine that goes a little something like this:
"Yah my name's Mike and I live up in the Islands. Uh lets see I been self-employed in remodeling and painting for the past oh about 7 years. Real interested in talking to you about your opening. I got all my own tools, truck, staging, ladders, and I'd be willing to come on as a sub."
In other words, sure Mike, while I'm focusing on building a better business I will gladly bring you on board as a sub since you cant find any work of your own right now and when things pick up you can bail. No problem. And I'm sure you dont carry comp, so I will pick that up for you. Would you take $40 an hour?
I guess part of the ongoing sub/employee discourse on here has a regional component to it. In this podunk little state where I engage in acts of commerce, there are no big fish paint companies. So when someone rolls into Painttalk for a hit and run post in the middle of a serious thread saying that "all the best paint companies in (his) area use all subs lol :thumbsup: you guys take it all to personell lol :thumbsup:", that doesnt make much sense to me because I am a small fish in a small pond. NEPS is a bigger fish in a much larger pond. And we scratch our heads. But someone said it and I believe it just as much as I believe that someone can out cut me with his 4 inch cutting brush even though he hasnt been in the field very much in many years. Clearly, I digress. But in the end, many of us have good businesses and are part of the larger community.
I've used subs in the past, and without question, I could sit here for hours and entertain you with unbelievable stories about things that the subs did. It must be a reflection on the fact that we have such a small talent pool here in Vermont and so therefore not as many good painters available to us, but then I guess that would mean not as many bad ones either. I've seen, hired and fired my share of bad ones. We see it on here all the time, someone with some basic paint skills, no equipment and insufficient product and process knowledge has one "job" fall in their lap where someone will pay them $20 an hour because they wont pay a real paint company more than twice that, and a new sub is born. Then another and another. The posts pile up: "How do you gyus market?" "What advertizing work bestest?" "How do I price new contructoin?" Then we really confuse them and their customers by telling them that they need to charge $40/hr when they arent worth 12.
Ultimately, there are successful paint companies and not so successful ones. There are a few roads we can take to get there. As JTP said, we take the road that suits us best, or something like that. What matters most is that the good and legitimate companies get there.
I have been in the same boat Scott. most of my applicants have had no painting at all and I feel they were just sending a resume or applying to please the IL dept. of employment security to continue getting there checks. I have one guy who I will met next week looking to learn the painting trade and will to start out low and learn. I will see how that goes.
My current summer college helper is a guy that had one year with college pro last year and he learned nothing from them! He has some interesting stories.
My current summer college helper is a guy that had one year with college pro last year and he learned nothing from them! He has some interesting stories.
I've done a lot of sub contracting in my day before I got out on my own. The one thing that everyone must remember is that if you do decide to hire a sub, make sure they carry their own liability insurance. If something happens where the sub damages property it's covered on his insurance and not yours.
It's weird that this subject came up because I'm starting to get really slow and might be forced to shut my doors and sub for somebody. Hey Mak! U looking for guys? :> I live in the NW burbs!
It's weird that this subject came up because I'm starting to get really slow and might be forced to shut my doors and sub for somebody. Hey Mak! U looking for guys? :> I live in the NW burbs!
I sub out all my spraying on big jobs. I always use the same contractor, he's one of those young airless-whizz kids. I send him a 1099 every year and that's it. I have found it a LOT easier to work with another contractor on big jobs, I don't make any less money either because he works 3x faster and better than any employee I've ever seen. Just make sure they have their own liability insurance and all that stuff.
NEPS,
I appreciate your post. It takes a real stand up guy to write something like that and it demonstrates a quality of character that I can truly admire.
Someone who wants to run a shady business will find a way to run a shady business-- that is, skirt the law. Typically, anyone who operates a shady business wil mistreat his workers and customers. This is true whether he uses subs or has employees.
I will concede that there are areas of the country where using subs is a likely sign of shady dealings. In states with lots of requirements on business owners--such as insurance and a state income tax--using subs is a way around those requirements.
Texas is a very sub-friendly state, and using subs is common. However, I see a lot of companies that: supply all materials, supply all equipment, and pay by the hour. They call their workers subs, even though all 3 of those actions violate the IRS rules and qualify the workers as employees. I would call these shady companies.
In my mind, it isn't about whether a company uses subs or has employees. It's about whether the company operates above board, follows the law, and treats workers and customers properly.
Brian Phillips
I appreciate your post. It takes a real stand up guy to write something like that and it demonstrates a quality of character that I can truly admire.
Someone who wants to run a shady business will find a way to run a shady business-- that is, skirt the law. Typically, anyone who operates a shady business wil mistreat his workers and customers. This is true whether he uses subs or has employees.
I will concede that there are areas of the country where using subs is a likely sign of shady dealings. In states with lots of requirements on business owners--such as insurance and a state income tax--using subs is a way around those requirements.
Texas is a very sub-friendly state, and using subs is common. However, I see a lot of companies that: supply all materials, supply all equipment, and pay by the hour. They call their workers subs, even though all 3 of those actions violate the IRS rules and qualify the workers as employees. I would call these shady companies.
In my mind, it isn't about whether a company uses subs or has employees. It's about whether the company operates above board, follows the law, and treats workers and customers properly.
Brian Phillips
Hey Jeff, are you just a Faux guy? or do you paint too? I can use some help maybe you can PM me and I'll give you my contact info.I've done a lot of sub contracting in my day before I got out on my own. The one thing that everyone must remember is that if you do decide to hire a sub, make sure they carry their own liability insurance. If something happens where the sub damages property it's covered on his insurance and not yours.
It's weird that this subject came up because I'm starting to get really slow and might be forced to shut my doors and sub for somebody. Hey Mak! U looking for guys? :> I live in the NW burbs!
I left a message in your visitors section of your profile.
This thread raises some good issues.
In my state a "subcontractor" is a specific trade licensed, insured, EIN, FIN, WC and registered with the state as a business. Big red flag if you 1099 an individual, so my accountant says.
I know my husband worked for another painter who was audited and had to pay back taxes on all the employees he 1099'd except us, we had a company.
There are "independent contractors", like the sample ladies at Costco, not a licensed trade though.
So I guess the difference is in each states requirement?
The IRS has this
http://www.irs.gov/pub/irs-pdf/p1779.pdf
In my state a "subcontractor" is a specific trade licensed, insured, EIN, FIN, WC and registered with the state as a business. Big red flag if you 1099 an individual, so my accountant says.
I know my husband worked for another painter who was audited and had to pay back taxes on all the employees he 1099'd except us, we had a company.
There are "independent contractors", like the sample ladies at Costco, not a licensed trade though.
So I guess the difference is in each states requirement?
The IRS has this
http://www.irs.gov/pub/irs-pdf/p1779.pdf
RC
Interesting. This is why it is such a confusing issue. I read the IRS brochure that you posted and the difference between a sub and an employee seems pretty clear. I dont understand how there is so much variety of interpretation and enforcement from state to state when the IRS is a federal entity. I guess it is selective enforcement in different states. I too have seen what happens to contractors when the jig is up and its not pretty. The penalties and interest far exceed the unpaid employment taxes, and ditto for comp and social security. Ultimately, I would be less comfortable looking over my shoulder every day than I am paying these ridiculous taxes.
Interesting. This is why it is such a confusing issue. I read the IRS brochure that you posted and the difference between a sub and an employee seems pretty clear. I dont understand how there is so much variety of interpretation and enforcement from state to state when the IRS is a federal entity. I guess it is selective enforcement in different states. I too have seen what happens to contractors when the jig is up and its not pretty. The penalties and interest far exceed the unpaid employment taxes, and ditto for comp and social security. Ultimately, I would be less comfortable looking over my shoulder every day than I am paying these ridiculous taxes.
Scott,RC
Interesting. This is why it is such a confusing issue. I read the IRS brochure that you posted and the difference between a sub and an employee seems pretty clear. I dont understand how there is so much variety of interpretation and enforcement from state to state when the IRS is a federal entity. I guess it is selective enforcement in different states. I too have seen what happens to contractors when the jig is up and its not pretty. The penalties and interest far exceed the unpaid employment taxes, and ditto for comp and social security. Ultimately, I would be less comfortable looking over my shoulder every day than I am paying these ridiculous taxes.
The IRS part is clear and doesn't vary from state to state. However, each state has different insurance and licensing requirements. Texas, for example, has neither.
In a state that does have licensing and insurance requirements, a sub would have to be licensed and carry his own insurance to meet that's state's requirements of being a contractor. In such a state, a person couldn't be a sub until he met the requirements of being a contractor.
There are 2 issues-- one is meeting the IRS requirements of what constitutes a sub, and the other is meeting the state requirements of what constitutes a contractor. The former doesn't vary. The latter does.
If I moved to a state with more stringent requirements and did some of the things I currently do I would be breaking state laws, but not federal laws. That is, I think, where some of the disagreement/ confusion might be. Texas is about as business friendly state as there is.
Brian Phillips
Does a customer really need to know if we use subs or employees?
I would say that about 40 percent of my customers ask if I use subs, there is a misconception out there that subs are a bad thing. I used to be one that looked down on companies that sub'd work out, but that was when I was a painter and not a businessman. I used to be proud to say "no ma'am" we only use our own employee's" like it was a bad thing to use subs. When and why did consumers start thinking subs were a bad thing, that word is so misunderstood that I don't even feel like explaining it to customers.
So back to my first question...Does a customer really need to know if we use subs or employees? If a white van pulls up, painters get out, do the work specified in the work order, and all is well.... does it really have to be told that they were subs?
I would say that about 40 percent of my customers ask if I use subs, there is a misconception out there that subs are a bad thing. I used to be one that looked down on companies that sub'd work out, but that was when I was a painter and not a businessman. I used to be proud to say "no ma'am" we only use our own employee's" like it was a bad thing to use subs. When and why did consumers start thinking subs were a bad thing, that word is so misunderstood that I don't even feel like explaining it to customers.
So back to my first question...Does a customer really need to know if we use subs or employees? If a white van pulls up, painters get out, do the work specified in the work order, and all is well.... does it really have to be told that they were subs?
NEPS,
Texas is a very sub-friendly state, and using subs is common. However, I see a lot of companies that: supply all materials, supply all equipment, and pay by the hour. They call their workers subs, even though all 3 of those actions violate the IRS rules and qualify the workers as employees. I would call these shady companies.
Is this for "like-trades" only? In other words, if I sub the paint work from a builder, and the builder pays me by the hour, is that builder (or me) operating within the laws?
In this situation the builder is violating federal laws. The IRS regulations state that a sub can't be paid by the hour. A sub has to have the "ability" to have a profit or loss. Paying by the hour eliminates this ability.Is this for "like-trades" only? In other words, if I sub the paint work from a builder, and the builder pays me by the hour, is that builder (or me) operating within the laws?
Brian Phillips
BrianIn this situation the builder is violating federal laws. The IRS regulations state that a sub can't be paid by the hour. A sub has to have the "ability" to have a profit or loss. Paying by the hour eliminates this ability.
Brian Phillips
Is that really to say that you cant have a profit or a loss doing t&m? If so, my bookkeeper has been generating reports that are meaningless to my business!
I don't volunteer that information, but if a customer asks I am honest about it. I explain my procedures, training, expectations, etc. I tell them that I am not using day laborers, that I have long term relationships with my subs. This is sufficient 99% of the time.Does a customer really need to know if we use subs or employees?
I would say that about 40 percent of my customers ask if I use subs, there is a misconception out there that subs are a bad thing. I used to be one that looked down on companies that sub'd work out, but that was when I was a painter and not a businessman. I used to be proud to say "no ma'am" we only use our own employee's" like it was a bad thing to use subs. When and why did consumers start thinking subs were a bad thing, that word is so misunderstood that I don't even feel like explaining it to customers.
So back to my first question...Does a customer really need to know if we use subs or employees? If a white van pulls up, painters get out, do the work specified in the work order, and all is well.... does it really have to be told that they were subs?
I understand that a lot of people have a negative image of companies that use subs. A lot of companies that use subs are shady companies, particularly in states with more stringent regulations.
From my experience, both customers and legitimate contractors in such states will have a similar attitude towards companies that use subs-- a shady company trying to skirt the law. In states that are more "sub friendly" the opposite is true-- they just want the work done according to the agreeement.
I am not familiar with the laws in every state, but my general perception is that the South is more "sub friendly" than the Northeast, the Midwest, and the Far West. To put it another way, red states tend to be more "sub friendly" than blue states.
Brian Phillips
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