The decision to make Mr. Tacy an employee or an independent contractor is based on how much
Question:
The decision to make Mr. Tacy an employee or an independent contractor is based on how much freedom the company is willing to give Tacy, along with other factors. Factors such as how much freedom he will be given, what obligations he will have, and his work schedule. Tracy is being tasked with recruiting employees and hiring IT/ computer employees. This suggests that he technically does not need to work under Clean to complete this task. "According to the Restatement (Second) of Agency, Section 2, "an independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking"(2012). It is important to note that Mr. Tracy would only be used when there was a position that needed to be filled. If need be, Clean could make him a full-time employee, if that is something that he wanted.
Financially, it would be wise for Clean because they would not be responsible for taxes, social security, or workers' compensation. "This distinction between agent and independent contractor has important legal consequences for taxation, workers' compensation, and liability insurance"(2012).
Clean might not need to hire computer/IT workers on a full-time basis, therefore hiring Tacy as an independent contractor to find and hire these services might be useful to Clean. Although they won't have complete control over Tacy, they might make it clear under what circumstances the agency relationship will end. For instance, including an end date or a withdrawal of agency clause would enable Clean to terminate the contract if they were unhappy with the services. Of course, by initially hiring Tacy as an independent contractor, you have the flexibility to renegotiate the contract and make him an employee if the situation changes.
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey