We NEED Change!

I’ve been in the industry for 20 years and I tell young kids DO NOT GET INTO THIS INDUSTRY . . . Why? Because the flooring installation industry is lacking. We are a hardworking group that doesn’t get compensated for all the abuse we put ourselves through. Flooring is TOUGH on your body, to the point a lot of other tradesman have told me that they couldn’t imagine having to do this full time. Not only is it super hard on the body, where are the compensation and benefits like other trades? Flooring doesn’t require schooling or certifications so that means we’re not worth as much? Give me a break. The people who actually take their time to educate themselves are constantly underbid by someone who is looking to cut a corner to make a quick buck.

We. Need. Change!

I was once told that I wasn’t liked by one of the flooring stores because I am “Trying to change the industry” and they thought it was an insult. This is one of the best compliments I’ve ever had, and I hope one day our name sticks out as one of the few who actually help the industry. What kind of change is needed? LOTS. Let’s just start out with the basics.

Most of the flooring contractors around the area subcontract their labor out. By doing so they avoid the costly expenses of having employees. Does it work? The short answer, not all the time. The government has processes in place that need to be followed and I see far too many “independent contractors” working for just one contractor. The problem here is that they SHOULD be considered an employee.

The second step in this is that the “independent contractor” then hires his own guys and pays them on a 1099 as a, you guessed it, another 1099 “independent contractor” doing work for just that one person.

This is where people get all butthurt when I call them out and say “it’s legal, it’s how we’ve always done it”

We have to pull it together and realize that it’s not how it should be. I started as a 1099 “employee” when I was 12 years old. The problem with this is that most people DO think that it’s ok. It’s time to educate these people. This is one of the biggest problems that I see and it’s because this leads people to not pay their fair share of taxes. When they don’t pay their taxes they don’t have to “worry” about raising their prices because well, they’re not paying their taxes.

There’s far too many flooring business owners who are GREAT at flooring installation, but lack the business knowledge to run it. This is one of the main reasons we lack the benefits other trades have. When you can’t even classify employees right, how is it possible to establish a benefits package? How can we as an industry compete and get new young talent, when a factory can start someone out at $14-$16 an hour and have a benefits package of paid vacation, retirement, health, dental and life insurance right from the start? We. NEED. Change!

Look. We are ALL in this together, and without us all doing SOMETHING we aren’t going to be able to attract the talent to lead the flooring installation industry in the future. Just. Do. SOMETHING.

Start out small. Do you have guys who should be employees but you pay them on a 1099? Switch them over to a w2. Why? It’s the right thing to do.

Do you already pay your employees on a w2? Look into what benefits you can offer to them, maybe start with a paid vacation?

We all need to come together and push for the future, because times are changing and it’s time for us to adapt. Raise your prices, pay your taxes, and pay your guys the way they should be paid. Let’s start making a change!

Feel free to comment below.

For direct questions or comments email daniel@preferredflooringmi.com

Classification of Workers

Now this may be a sore subject for a lot of the trade contractors out there. I have seen MANY people argue that the way they classify their workers as independent contractors, and not employees is correct. Their argument? It's the way they've always done it. As in the installation world, just because it's the way you've always done it, doesn't mean it's the correct way!

Over the past few years the IRS has implemented a set of rules to help employers classify their workforce. There are three main categories when looking at whether a worker is an independent contractor or an employee. 

1. Behavioral: Does the employer have the control over how and what the worker does their job?

2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension, insurance, vacation pay, holiday pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses have to look into all three aspects and make a determination as to classify their worker as either an independent contractor or employee. Although the worker may fit into a different category in either of the three categories, it's important to take all of it into consideration, especially the extent of businesses right to control or direct the person when you make a final decision as how to classify. 

If you're still unsure of how to classify a worker, the IRS has a form you can fill out here. This form can be filled out by either party (the business, or worker) and may take up to 6 months for the IRS to make a final determination for the worker. Workers who believe they've been misclassified can also file form 8919 to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation.

Misclassification of an employee can lead to being liable for the taxes of that employee. The first line of Internal Revenue Code section 3509 states :

- When an employer erroneously treats an employee as a non-employee and does not withhold federal employment taxes, the employer is liable under IRC 3102 and IRC 3403 for the employee's share of social security and Medicare tax and the employee's income tax withholding.

There are some relief efforts made by the IRS as well. Section 530 can relieve you of having to pay the workers employment taxes If you have a reasonable basis for not treating a worker as an employee (you must not have paid anyone else in a similar position as an employee in order to qualify). There also the Voluntary Classification Settlement Program (VCSP) that provides the opportunity to reclassify workers as employees for future tax periods with partial relief from federal employment taxes. 

In the flooring industry we are surrounded by companies who misclassify workers. Labor companies who try and "make it right" by purchasing their workers insurance policies. A group of individuals working together day in/day out led by a single person but are somehow "independent" from one another. These cases also play into the fact that a lot of these people also do not file their taxes. Why? They owe a bunch of money at the end of the year, taxes that should have been throughout the year, but was never accounted for, so they skip filing altogether. 

Workers deserve the protections of being an employee when the circumstances are there. They shouldn't be liable for the employers portion of their taxes, social security and medicare. If you think as a business owner you're saving money by not having to pay for workers comp insurance, bad news, you're still liable because the worker is misclassified and should have been an employee all along. So if you have workers who should be employees, do your part, use the governments relief efforts and reclassify those "independent contractors" as employees, they deserve it! 

Feel free to comment below.

For direct questions or comments email daniel@preferredflooringmi.com