This question popped on a Linked In discussion group recently:
Here is our scenario: We have “unpaid” part time workers who are provided expense allowance stipends up to $1,200 per month. They receive free lot rent, housing, cable TV, all utilities, and are reimbursed for gasoline expense. They purchase supplies and materials with corporate credit cards. They are not required to work a regular schedule with the exception of the first 5 days of each month (5 hours per day.) They do not wish to be sent a 1099 form as an independent contractor. #1: Are they independent contractors?; and #2 If they are not, are we OK not to have them on the payroll? Please offer any thoughts you may have. Thanks.
Questions like this come up all the time at park owner meetings, conventions and in publications. There are as many interpretations of how to treat work campers as there are campgrounds. There are three important principles to keep in mind when dealing with this group of part-time workers.
Principal 1: Don’t mess with the IRS. Among the most stressful things a small business owner can come up against (after death of a spouse and a divorce) is a window envelope addressed to you from the IRS. Rarely does this envelope contain good news.
Principal 2: There are very few ways (I actually cannot think of any ways) to compensate a non-family member who works for you that do not involve some tax obligation to the payee or the recipient, or both. In the scenario above, seems to me to be hard to call these folks “unpaid” workers.
Principal 3: The tax issues and needs of work campers are their problem, not yours. No matter how good they may be, or how good you think they will be, meeting your business needs and protecting your business and family always comes first.
As a small business person for many years in retail, campground and campground consulting businesses, one key objective I most want is to avoid any state or federal audits by the IRS, the state employment commissions, state tax authorities, etc.
I’ve found the best way to avoid these unpleasant and time consuming experiences is to avoid, minimize and understand any gray areas such as are associated with independent contractor rules, insurance and workers comp liabilities and issues, undocumented workers, sales tax collections and disbursements, tourism taxes, volunteer workers, etc.
When it comes to staffing an RV park or campground, the process I’ve used with some success is to first establish a personnel plan and realistic budget that will enable me to staff which is best park properly and adequately and provide the level of service, standards and experiences I want my guest to have.
The second step is to then consult with human resources and tax and insurance experts as to how best to implement the plan. The primary objective should always be to legally hire the absolute best people to do the jobs that need doing and not to finagle around with dubious schemes that may lead to unnecessary problems and hiring based on the wrong criteria. The individual tax avoidance or reduction issues of potential employees is there problem, not yours or mine. Let’s not make our lives any more complicated than they already are.
The cost of strict compliance with tax and related laws is far less then the cost of the stress and legal fees associated with trying to defend oneself in a fight with a federal, state or local government entity.
Another Thought on Temporary Workers
In today’s business world, so much is being said and written about the experience the business provides to the customer and how customers are seeking superior experiences in all of their life activities. A JD Power survey recently found that customers will pay up to 20% more for outstanding experiences (and outstanding products) than for a lesser product or experience. That’s a pretty compelling reason to focus on the guest experience.
For the most part, in my experience temporary workers and/or work campers are not usually capable of providing the level of service and the type of experience that can be provided by a regular employee – whether full or part time. The temp is not often familiar with the area in which the park is located. The temp or work camper has too many conflicting interests, business or things to do that distracts them from truly learning how to best serve the parks’ guests. Adequately serving guest needs and interests and providing the level of experience that makes the visit to the park truly outstanding is simply more difficult for the temp worker.
As we’ve heard from many sources over the years, hire or engage the best possible people to represent and be the face of your park. And that’s incredibly hard to do when interviewing and hiring over the phone or via Skype and the individual you’re trying to interview is only going to be with you for a limited period and for limited hours during that period. Hard to get a temp or work camper to “invest” in your business when they know they’ll be moving on and that the “camper” part is more important than the “worker” part.