I got a call today from a Texas roofer looking for an independent contractor agreement for his sales force. For those of you who have never "run" salespeople in your contracting business, let me explain why this is important.
First...An independent salesperson is their own boss and their own "company" so they are responsible for all the things that your employees require. Taxes, benefits, medical, disability, workers compensation, vehicle expenses are all ON THEM!
Second...Since they are independents, you don't have to supervise them the way you do your employees. This is especially useful if you operate in a large area. When you get a lead in a far away place, you can simply call your independent salesperson in that area to make the sales call.
Third... Independent salespersons are usually compensated on a commission basis only. There is no greater motivator for them to sell the leads you give them!
So you can see why most construction companies particularly those that do home improvement, prefer independent salespeople rather than employee salespeople.
The problem lies in making sure that your salespeople REALLY ARE Independent! It is not nearly enough to have an "ironclad" independent contractors agreement with them. The way you TREAT your salespeople and the control you place over them has as much, if not more, to do with their status as an independent contractor.
Here are a few considerations to take into account that I learned the hard way, first hand "in the trenches":
The Government whether it is the IRS, State Tax board, courts or labor commissioner will NOT consider a salesperson independent and will consider them an employee if:
YOU SET THEIR LEAD APPOINTMENTS even if they ask you to! You are controlling their time and that makes them an employee.
YOU PLACE LIMITS ON WHO THEY CAN WORK FOR! If you tell them they cannot sell the same product or service as yours for another company at the same time, you are controlling their business and that makes them an employee!
YOU DEMAND THAT ANY LEADS THEY GENERATE FOR YOUR PRODUCT OR SERVICE IS YOUR PROPERTY ONLY! You are telling them any business they generate is yours alone and that makes them an employee!
It is important to word your independent contractor agreement very carefully so your sales force is truly independent. But don't forget, how you treat your sales people and the controls you place upon them are just as important! Make a mistake here and you may be paying much more than a commission to your so-called "Independent Contractors"!
Questions or comments about this topic? How do you keep your sales force independent? Please comment below.