There is a huge controversy in the Pilates and fitness industry with probably enough debate for an entire book: Independent Contractor vs. Employee. So how do you distinguish one from the other and choose which is best for your business?
One thing is certain: Not knowing the difference between them can be detrimental to your business. In my opinion hiring independent contractors in the startup phase may be the best option. However, as your business grows, it might be in your best interest to switch everyone over to employee status as soon as possible.
An independent contractor determines on their own where they work, when they work and their own hours. Unless you include a clause negating it in their contract, they have the right to refuse teaching on your studio’s class schedule. Independent contractors have to pay their own self-employment taxes and will usually work at more than one location. They can change fees, have their own brand, and promote themselves without mentioning your business or space if they so choose.
An employee, on the other hand, can be required to teach a certain amount of hours a week, or to teach certain classes on the studio’s schedule. Specific trainings might be mandatory for them to attend or complete, wardrobe and/or uniform codes can be enforced, and employees can be required to attend promotional events or parties at your studio. They can also be required to reach out to clients that have been MIA from the studio, and cover classes and sessions when another teacher is away or sick.
Below I have listed some pros to having employees and cons to having independent contractors just to try and persuade you a little more!
Why You Should Hire Employees:
- Coverage – Nobody likes when classes and/or sessions are cancelled. But emergencies come up, people get sick and vacation time is necessary. Having employees can allow you to have more free time to yourself and also give your clients the security that your business will be safe and open even if you are gone!
- Consistency is Key – How many times have you heard this phrase? With a consistent stream of classes and clients it is much easier to coordinate teachers schedules since you can make a schedule with them and have set hours. Trying to juggle multiple independent contractors schedules, different studio schedules, personal time off, etc. can be very challenging.
- More Money – When you work alone, you are limited to the amount of hours and clients you can see in one day. When you have a team that works together you can see more clients during peak hours, have more classes, make more money for everyone and grow your business to another level.
- You’re Fired – Is there a teacher who is out of sync with your studio’s awesomeness? Is that one pain-in-the-booty, negative, competitive or entitled teacher who makes nothing but trouble for you still in front of your students? When you have employees you can do what needs to be done and clean house! Your studio is serving the clients, not drama-queens or divas. Get over the fear of their anger and what they’ll say about you online and just do it already. Your clients, your teachers, and you deserve much better.
- The More Brains the Merrier – I go to my team ALL the time to get their ideas, opinions, skills and knowledge. They do things I cannot do or don’t want to do. They help me grow my business everyday and give me amazing ideas all the time.
Cons of Having Independent Contractors
- No Control – I am a control freak so having no control of what goes on in my studios was not ok with me. Part of what makes a contractor independent is that they can make their own schedule, come and go as they please, work wherever they want and may even have less commitment than an employee.
- Inconsistency with Pricing – You might find the perfect independent contractor to be in your space. However, the rates that they are using and the rates you are using are completely different. This might aggravate clients or teachers. With an employee you can set prices within the studio for clients and set employees pay rates until the next review date.
- Money – I like my money where I can see it, like on my feet with new sneakers and in my bank accounts! What I don’t like doing is throwing money away or paying penalties to the IRS. If you make an error in labeling an employee as an independent contractor, you will be liable for employment tax, interest and penalties not to mention accountant and possible lawyer fees.
The decision to hire a teacher as an employee or independent contractor is up to you. However, you should be aware that the IRS considers a teacher to be an employee unless you can prove otherwise. In my opinion, it’s best to make everyone who works for you an employee at the studio. Yes, there might be more paperwork and leadership duties, but I believe it helps keep your business professional, real and legal. Studio owners or not, teachers and trainers are educators. What we do isn’t a hobby or just something fun we dabble in on the weekends.