Should you hire employees or independent contractors?
As a health club owner, you’ve likely looked at reducing employment and liability-related costs by hiring personal and group trainers, massage therapists and other client-dependent workers. There are both pros and cons when hiring employees and independent contractors.
Many club owners hire both employees and independent contractors, depending on the job and/or unique circumstances involved. The following points in the Infographic and information that follows it might help you to decide which is best for your business.
- When paying an independent contractor a flat fee or agreed upon percentage of services rendered, the club isn’t compensating the contractor unless he/she is generating revenue.
- Many independent trainers and massage therapists offer their clients personal services off premises and many often sell supplements and therapeutic products as well. The club owner may face sales competition if those same or similar products are sold in the club.
- Hiring an independent contract reduces the owner’s liability for negligence or errors & omissions by shifting much of this risk to the independent contractor. Club owners should request a current certificate of liability insurance from the contractor (and keep it on file) that lists the club as an “additional insured” on the policy.
- It’s much simpler to terminate a contractor than an employee, but be careful that the courts would actually classify the worker as an independent contractor.
- Club owners have little control over a contractor’s business style, teaching methods or attitude.
- A contractor is usually entrepreneurial by nature, and can become your biggest competitor. He/she will be familiar with your club’s strengths and weaknesses, and more than likely will have been given access to the membership roster.
A word about Workers’ Compensation
It’s usually assumed that issuing a 1099 to contractors saves costs on employment taxes and Workers’ Compensation. Depending on state statutes, the nature of the relationship, and how the contractor agreement is worded, the club owner may still be responsible for taxes and the contractor’s Workers’ Compensation benefits. It’s important to have a clear agreement that stipulates the contractor is an independent contractor. However, just calling the worker an independent contractor in an agreement is just one of the factors that a court will take into consideration.
Below are three basic elements that should be included in any independent contractor agreement:
- A clear understanding of the separate relationship
- A requirement that the contractor maintain his/her own insurance
- A hold/harmless statement or waiver indemnifying the club for the contractor’s negligence
Protecting yourself from liability claims
Did you know that liability protection is critical for all personal trainers? It only takes one injury-related lawsuit to financially ruin you and/or your fitness business. Having the right insurance protection offers you peace of mind.
Insurance coverage does not have to be complicated. At SADLER, we understand your needs and the unique risks associated with your profession.
If you would like to learn more about liability prevention or are ready to get a customized insurance quote, just apply online now or call 800-622-7370.
There are no obligation and your quote will be sent in just a few hours in most cases. With no application fees and the most competitive rates in the industry, you have nothing to lose.