When considering a decking contractor, would you rather work with a company that has its own employees or a company that hires out using subcontractors? What are the advantages and disadvantages of each? When evaluating vendors, is this even a buying consideration? My own take is that this it is important and one which will play out through the length of the project and relationship.
Fortunately, I’ve been on both sides of this debate (employees or subcontractors), so I’m pretty familiar with it. From 1990-1994, I was a subcontractor to one of the largest decking companies around, Archadeck. I didn’t have worker’s compensation on myself. I did, however, show worker’s comp to the company…but excluded myself for the policy. This is a legal and, unfortunately in my opinion, generally accepted position that most deck companies and subcontractors take today in the state of Georgia. The advantage is with the company in that it negates the need to match Social Security and Medicare expenses.
In 1994, when I started Tailor Decks, I had to make a decision on which path the company would take. I made a decision and have stuck with it since then. The decision was to go with employees…and here’s why-
While most contractors go the subcontractor route, I don’t consider this to be the right thing to do. My experience has shown me that most choose this route because it lowers the company’s fiscal responsibility to the government and their employees. I don’t think that a responsible thing to do. If someone were to get injured while working on a Tailor Deck project, it would ultimately be our responsibility to see that they were taking care of. Further, it’s our responsibility to shield our customers from any risk due to one of our workers being injured. Having subcontractors without Worker’s Comp puts customers at risk.
Secondly, I believe (and I’m confident that the IRS would agree) that it’s the company’s responsibility to pay Social Security and Medicare in spite of the subcontractor tax claim option. I believe that most contractors are playing with fire here and that, at some point, they’re going to have address the withholding taxes they’ve been ignoring for some time.
But in addition to it being the honest route, we choose the employee status because I believe it simply produces the best work. A subcontractor gets paid a lump sum for a project. In my experience, the faster he gets done the more money he makes…so he will typically work fast and care little about little mistakes along the way. Conversely, an employee gets paid hourly. He will typically slow down and catch any errors that take place (it’s my responsibility to make sure he keeps an appropriate working pace so that it doesn’t take a long time).
As a buyer of services, if this is an important criteria for who you use, you might want to ask during the proposal stage whether they use employees or subs. Most will want to tell you that they use employees. But since there is a potential downside to you if they turn out to be subcontractors (and they get injured without having coverage), you can ask the employer to produce a copy of the W2 for the workers. If they can’t, then they are probably hiding this from you…and it might be best to consider someone else.