Independent Contractors vs Employees, whom should a property management business hire?

Independent Contractors vs Employees, whom should a property management business hire?

Independent Contractors vs Employees is a question that haunts new or established property management companies. The company’s image/reputation is carried by their human resources and they depend a lot on them. Right from executing their services to pulling in new owners/clients are all managed only by human resources. Here we are going to answer this haunted question by weighing the above two options based on pros and cons.

How does CRA or IRS classify a resource?

A resource can be classified into three categories, full-time employee, independent contractor, and a dependent contractor. Below are 6 factors that determine the category

Based on its understanding of the law, the Canada Revenue Agency lists five factors to determined whether someone is an employee or a self-employed contractor:

  • Control on the work – who determines how, when, where and by whom the work gets done
  • Required Tools and Equipment – who provides the tools, equipment to provide the required service
  • Any subcontracting or assistants required – can the services be done by themselves or, is the worker required to hire assistants or sub-contract it
  • Who bears the financial risk – who bears the financial risk if the worker does not fulfill tasks ironed out in the contract
  • Investment and management – who makes the business decisions which causes a profit or loss? has the worker made an investment in its business?

Here are few factors, but not limited to 5. It is quite clear on the category when it comes to a full-time employee or an independent contractor. A dependent contractor is defined as a full-time contractor, which means he has few traits of both an employee and a contractor. A dependent contractor is an individual who does contracting work only for a certain client only and has been associated with this client for a long time.

4 benefits vs 2 downsides of hiring an independent contractor

Independent contractors are easy to find in Northern America, since the current human resource force likes temporary gigs that pay more. They frequently change employers, since they like to constantly explore options.

Easy pay structure

Managing an independent contractor is cost efficient since you do not need to deduct tax at source nor do you need to put them on a payroll. You only provide employment, and give a certain commitment based on the number of hours he/she works. The contractor is responsible for paying taxes, plan their 401K or retirement.

Low admin costs

Since the contractor is not your employee, you do no need to maintain their records such as SSN/SIN, Address proof or more. In fact, you do not need to run a background check. You only check the person’s skill, and they are ready to start working. All these accounting formalities are skipped, this means you save some money in term of admin/accounting costs.

No insurance costs

In North America, it is imperative to provide Insurance to your employees. Under FLSA (USA) or Canadian labour law you need to provide insurance (you pay or the employee) to your full-time employees only (employees who are not in probation). You don’t need to provide insurance to contractors. In-fact if a contractor makes a professional mistake, he/she must bear the expenses.

No human resources cost

You are not bound to provide 35-40 hours a week work to a contractor. If you have a need, you hire them. You also can fire or let go any contractor at any time. No questions asked. You would not be sued for wrongful termination.

No discipline

Since the contractor is not a full-time employee, you cannot expect him/he to follow your company norms or culture. He/she has the flexibility to work as per convenience.

No moral  

A contractor can work for your competitor, or he/she can quit work without prior notice.

Expected benefits and cost of hiring a full-time employee

Full-time employees in property management companies are preferred when the company has a growing clientele. With employees in-house, you can be at rest, since you know every employee will abide your company’s policy.  Since you are investing skill into an employee, you can expect the employee to stay with you for a long time. You will also have notice period in place that will allow you a head up if an employee plans to leave you.

Cost of hiring a full-time employee is like hiring a contractor. You will need to invest one time in hiring an employee, then forget about hiring. You only need to invest time with the employee. The only challenge here is, there are so many contract positions that are open in the market; it might be slightly difficult to find a full-time employee.

How to source contracts vs employees?

Sourcing a contractor or an employee is similar. You need to post ads in Job Banks such as Monster, Craigslist, LinkedIn, Glassdoor, and more. You might also need a head hunter for sourcing good employees. You can try putting ads on Kijiji or Facebook jobs too.

Managing resources, and creating KPIS in the hiring process

As per labour laws in Canada, and USA you might be sued if you are a wrongful employer or hire a wrong employee. First thing you need to do is to analyze the full-time resource during the probation period and decide if you want to move him/her to full time.

Employees don’t leave a company, they leave their manager. As an owner you need to constantly take feedback from all your employees. Right from a contractor to a manager working 40 hours a week. Constant communication will help create a fun environment to work at.

Make the employees feel proud about where they work. Have custom mats about your company in all your properties, so that your brand recalls among your employees, land lords, and tenants. Check out our collection of customs mats by visiting -> https://matsupplier.com.

How to pull in quality resources? 

Make sure your business gets good ratings and reviews on Google My Business, Glassdoor, Facebook and other listing websites. The more positive reviews you have, the better resource pool you will gather. Everyone wants to work for a company that has a positive feedback from customers and employees.

KPIs

This is simple, every employee should contribute to the revenue of the company. The most neglected KPI is revenue per employee. This is used by financial analyst when they are evaluating a business for acquisition. This KPI should be used for every business too. Every employee’s performance/pay should be linked to the number of reviews and feedback they pull in, apart from the revenue. At the end, you are running a business to create a name and ear money.

Final Verdict

I would like to keep this short. Hire full-time employees in your growth phase, hire dependent contractor if your business is not stable, and hire contractors if you have short term clients. Base on your situation, hire the right type of employees. I hope we answered Independent Contractors vs Employees in the right way.

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