Is a commisioned based worker an employee or independent contractor?

Question

I own a small service based business. As it grows I will need to add help, but the work may be sporadic, and definetly part-time at best for another worker. I can hire an employee, which means I retain control over the job but have to pay minimum wage, take out taxes, workmen's comp, etc OR I can hire an independent contractor, lose specific control but not have to take out taxes or workmens comp. My basic questions are: #1 Is a commissioned based worker considered an employee or an IC? #2 If I pay by commision, do I take out taxes, workmens comp, etc? and #3 Does the total commission have to equal at least minimum wage for the hours worked? Don't get me wrong, I don't want to pay someone just $3.00 an hour, but I also don't want to eat up my profits when there isn't work for them to do.

Answer 1

You can set it up either way. If a worker is under your control and supervision for over 3 months, he is an employee whether he is commissioned or salaried.

Answer 2

The most important factor for determining employee vs. independent contractor is whether or not you maintain the "right of control" over the worker. In layman's terms, I would describe it this way:
As an independent contractor, an individual is essentially in business for themselves. They maintain their own supplies, pay their own expenses, carry their own liability insurance, etc. An employee, on the other hand, has no other concern, other than hoping that their paycheck clears.
Also, an employee can work an hour and still be considered an employee. There is no time threshold for being an employee.
There are other factors involved, but it is important to note that you shouldn't be hiring somebody off the street and then calling them an independent contractor.

Answer 3

a commissioned based worker is an independent contractor
Yes taxes and workmans comp are inherent in any transaction
Yes total commission must equal minimum wage for the hours worked, in fact that is all that you must need pay taxes on
No need to eat profits but an IC must be compensated for any and all work performed on a fixed percentage over and above the minimum You only need not report it as expenditure

Answer 4

According to the IRS there are basically four types of business relationships between an employer and the person performing the services for the business. The appropriate category must be determined in order to insure that you, as an employer, are paying the correct employment taxes. The person performing the services may be:........see link. I hope this helps you!