Hiring a Consultant? Some Things to Consider

Consultants are a great resource for companies to bring in expert advice or to handle specific projects. There are a lot of winery professionals that call themselves consultants, but as an employer and a company, there are a few things you need to think of when bringing on a consultant.

The IRS offers an online 12 point checklist to use to make sure you are hiring a consultant. A consultant is a business person who is responsible for their own business, taxes and marketing. A winery does not have any responsibility to a consultant other than that outlined in a consulting agreement. The general rule of thumb is that a person is an independent consultant if the hiring company has the right to control or direct only the result of the work, not what the work is to be done or how the work will be done.

The basic items the IRS checklist covers are:

• Behavioral Control: An independent consultant is not directed and controlled by the client. The client can only direct and control the work.
• Financial control: A contractor has a financial stake in the work, and will incur expenses that the client does not need to reimburse for. Also, a consultant can show a profit or incur a loss for their business, unlike an employee who is compensated with a salary.
  
• Relationship of the Parties: A contractor must maintain their own benefits, insurance and business activities. A consultant is not an employee, and therefore is not entitled to the same benefits an employee is.

Why is this important? There have been rulings in the past where independent consultants did not meet these requirements, and were eligible to receive the benefits of a regular employee. Microsoft and several other large companies were found to be misclassifying regular employees as independent consultants. These were landmark rulings, and have caused independent consultants to come under scrutiny with the IRS.

A 20 point checklist has been created to see if a consultant is really able to be classified as a consultant. Here are the questions:

For the following questions, a "yes" answer means the worker is an employee.
1. Does the principal provide instructions to the worker about when, where, and how he or she is to perform the work?
2. Does the principal provide training to the worker?
3. Are the services provided by the worker integrated into the principal's business operations?
4. Must the services be rendered personally by the worker?
5. Does the principal hire, supervise and pay assistants to the worker?
6. Is there a continuing relationship between the principal and the worker?
7. Does the principal set the work hours and schedule?
8. Does the worker devote substantially full time to the business of the principal?
9. Is the work performed on the principal's premises?
10. Is the worker required to perform the services in an order or sequence set by the principal?
11. Is the worker required to submit oral or written reports to the principal?
12. Is the worker paid by the hour, week, or month?
13. Does the principal have the right to discharge the worker at will?
14. Can the worker terminate his or her relationship with the principal any time he or she wishes without incurring liability to the principal?
15. Does the principal pay the business or traveling expenses of the worker?

For the following questions, a "yes" answer means the worker is an independent contractor.
16. Does the worker furnish significant tools, materials and equipment?
17. Does the worker have a significant investment in facilities?
18. Can the worker realize a profit or loss as a result of his or her services?
19. Does the worker provide services for more than one firm at a time?
20. Does the worker make his or her services available to the general public?
(from TaxProphet.com, http://www.taxprophet.com/apps/active2/indep-mm.html).

Making sure your consultant is a true consultant and not a quasi-employee will allow you to have them bring their expertise to the company, and allow you the flexibility to maintain the appropriate compensation and employment relationship.

These points were previously discussed for consultants on WineTalent's employment blog at Avoid the Taxman: http://winetalent.blogspot.com

Employee Morale After Layoffs

With the current economic situation, many wineries are dealing with staff reductions. After weathering the layoff, the employees that are left are often nervous and apprehensive about their own job security. Managing through this time is necessary and can quickly improve productivity.

Elizabeth Garone of the Wall Street Journal recently published an article in the Career Journal about steps to take after a layoff. Here are the five things she outlined to keep morale up

• Find alternative incentives: If you previously gave out cash incentives for meeting or exceeding goals and now can't justify the expense, think of other ways to incentivize your staff. At my former employer, we created various bonus programs that included half-day and full-day paid time off. These programs also included various small ticket gifts and lunches. After working on large projects, Fridays were reserved for a staff lunch where we were able to joke and relax a bit more. All of these led to great increases in morale.
• Transparency is key: Communicate with your staff about why the lay-offs occurred and what the company is doing to right the ship. While losing co-workers is hard, employees like to see what is happening with the company and see ways to help the company become more profitable. Also openly discussing the situation allows people to ask questions and raise concerns in a non-threatening environment.
• Recognition counts: Everyone likes to be recognized for a job well done. During this time, make sure you talk to people who are putting in extra effort and thank them for it. Don't forget that keeping the business running smoothly during this time of upheaval can be the biggest accomplishment, and recognizing anyone who is helping in that vein is very important.
• Keep educating: When budgets are slashed, training can be one of the easiest areas to economize on. While you may not be able to send your staff to a company retreat, bring experts in to talk about certain situations. As Ms. Garone points out, having staff members lead in-house training sessions can be very enlightening. Look at the talent you have within the company or staff unit, and give those people a forum to teach others.
• Promote a good work/life balance. After a layoff there are fewer people to do more work, which can lead those who are still around to lose the balance between work and home. While it is important to keep your staff working while at work, remember that the stress they are facing at work can spill over to problems at home. Be sensitive to employees' needs to help out at home or take time out of their day to address some personal needs. By being compassionate, your staff will be understanding as well.

Employment and Labor Lawyer

Many of the resources I've mentioned were brought to my attention by my attorney friend Barbara Cotter. Barbara specializes in employment law, and is a partner at the Sacramento offices of Cook Brown, LLP. Cook Brown, LLP specializes in representation of employers in all aspects of labor relations and employment law.

Barbara Cotter is very active in the legal community, and is a valuable resource for you. Please visit the Cook Brown, LLP, www.cookbrown.com website for her contact information.

Employment Law Resources

My employment lawyer contact recommended some sites for employment-related news and updates. These websites are a resource for you, and often offer instruction and training on some employment issues.

• Jackson Lewis, Workplace Law Firm, http://jacksonlewis.com. The Legal Updates section has a lot of valuable insight.
• Shaw Valenza, LLP, http://shawvalenza.com, What’s New in Employment Law Blog
• The California's Chamber of Commerce has a lot of valuable employer information, www.calchamber.com
• Carlton, DiSante and Freudenberger, LLP has a CA Labor Law Blog,
  http://www.cdflaborlaw.com

Some government sites are also a good source. Some that focus on California law are,

• California Department of Fair Employment and Housing, www.dfeh.ca.gov
• California Department of Industrial Relations, www.dir.ca.gov
• California Employment Development Department, www.edd.ca.gov

Also, the Internal Revenue Service site has a lot of information for employers, www.irs.gov

Employment Law Resource Available to You

For years I have talked to lawyers about employment law in California. California is one of the toughest states for employers, and the laws are often unique to this state. A resource for any California employer is the California Chamber of Commerce's HRCalifornia. The CalChamber is the largest business advocate in California. The Calchamber offers many products and services to employers, and their employment law information is a regular reference for lawyers and employers alike.

Tax Laws Change for Deferred Compensation

In 2008 Congress and the IRS adopted new rules in regards to taxation of deferred compensation. Deferred compensation is money earned in one year but paid in another. Examples include stock options, executive retirement plans, bonuses, salary reduction arrangements and bonus deferral plans. This tax law change has significant impacts on many executive pay packages. The IRS is requiring that deferred compensation amounts be included immediately in an employee's income. An additional penalty tax may also be owed, which is equal to 20% of the deferred compensation amounts. ,

My employment lawyer contact said this rule should be carefully followed, and companies should evaluate their compensation policies in light of the new tax law.

I looked up several sites for guidance on this. The IRS site has a lot of information for you. For a simple write up about it, I found Gordon, Thomas, Honeywell, Malanca, Peterson & Daheim LLP's site to have good information. I don't have any connection with that law firm, but found their information easy to understand and similar to other sites I reviewed.

Furloughs

Living in the capital city, I hear a lot about what the state government is doing about the current economic downturn. Here in the heart of the city, many of my neighbors and friends are state employees. Recently, the state has put most of their staff on a two-day-a-month furlough. In the past, many employers furloughed workers when needed. But in recent years, furloughs have been replaced by lay-offs and reductions-in-force. Furloughs can be a great solution for handling a slowdown, allowing you the ability to bring your staff back to full-time hours once the economy picks up.

Yesterday the Wall Street Journal had an article about how furloughs are being used. In the article by Dana Mattioli and Sara Murray, they discuss how companies are furloughing staff.

While many companies still choose to lay-off employees, a furlough can allow the employees to stay on as regular, salaried employees with the same benefits and wages. With the state's furlough, the employees are working two less days a month, which in effect is a 10% reduction in pay. While many people are moaning about bringing home less money, the other option is cutting staff. Most employees don't want to potentially be the 10% of staff laid-off.

Saving money monthly in wages is an attractive option for many employers, and the ability to end the furlough when times are better allows the staff to stay whole. This also allows you to eliminate new recruitment efforts when times improve, allowing management and human resources to focus on other issues.