Employee Protections: What You Need to Know in 2020
Grooming Business Basics
By Khris Berry
Unless you are in a state of media deprivation—social, digital, print or otherwise—you have likely seen articles or discussions suggesting that most groomers do not qualify as independent contractors, according to the Internal Revenue Service.
Before you stop reading, this article does not discuss the pros and cons, but rather the protections afforded to employees that are not available to the self–employed. If you want to familiarize yourself with the parameters discussing independent contractors and your grooming business, please acquaint yourself with the IRS 20 Factor Test1.
When discussing groomer pay, many former and long–time groomers mention percentages, commission and earnings as a benefit of being an independent contractor. Many employers have struggled to manage margins and maintain profitability when paying groomers as employees because commissions and earnings of independent contractors were so high in comparison to the margins of the business.
Both of these scenarios have previously been a hurdle which neither party was willing or able to overcome, thus meaning that there are plenty of groomers nationwide working (knowingly or unknowingly) as independent contractors.
We are living in uncertain times—from recessions to slow downs from social distancing to business closures—no one expected a Novel virus to impact the globe. Even though groomers are a hardy, resilient group, every one of us has been impacted in some manner by the new world we are navigating.
Here is a countdown of the top ten reasons why now is the appropriate time to consider updating any outdated, archaic or misguided management of groomer pay:
10. Employers pay into the Social Security accounts of employees, and by not being classified as an employee, a groomer is actually losing valuable benefits which they may rely on later in life. As an employee, your employer is actually contributing a portion of your wages for your later benefit. Those contributions are 7.65% of every dollar you earn that is paid into your Social Security and Medicare federal accounts. If your particular state collects State income tax, your employer is probably contributing to your state’s unemployment and disability on your behalf.
9. By paying groomers as independent contractors, an employer undermines the entire industry by offering services at rates which do not encompass valuable benefits such as Social Security matching wages, workers compensation, paid time off and health benefits. The playing field cannot be leveled until employers are all playing on the same legal, sustainable field.
8. Groomers who work as independent contractors are not afforded Workers Compensation benefits. Employers who do not hire groomers as employees may not pay workers compensation premiums but are vulnerable if they do not have appropriate coverages should an injury occur on their premises. According to articles published over past years, pet services is in the top 10 most dangerous industries in the US—wouldn’t you want insurance coverage with those statistics?
7. Groomers who work as independent contractors often find themselves saddled with the burden of taxes. Income tax is assessed on all workers and self–employment tax is assessed to the independent contractor additionally. Depending on your personal taxation experience and status, you may find yourself owing large sums or struggling to navigate the nuances of self–employment. Being an employee ensures that you have assistance in reporting and withholding some (if not all) of your income tax burden. Yes, we know you have lots of deductions, but have you actually tested those through the audit process? As of 2019, employees can no longer deduct 2% of their AGI (adjust gross income) as non–reimbursable employment expenses. This actually simplifies the tax filing process. You no longer can itemize whatever expenses you had throughout the year. Instead, employees can take the standard deduction of $12,200 whereas self–employed can’t. That should more than cover your cost of tools, sharpening, bows and cologne. And what about those of you who haven’t filed taxes in several years because you didn’t pay your tax deposits in advance?
6. What are benefits worth to a groomer (we don’t necessarily mean free dog food)? The road to having health insurance and other valuable benefits afforded to American workers is through employment. With a looming national and world health crisis, employees who enjoy vibrant health insurance protection can rest a bit easier knowing their own health costs will be supplemented and capped. Groomers and employers must work together to find margins and business practices which allow employers to offer health coverage for employees.
5. When individual states declare a “State of Emergency” during periods of crisis, this releases funding which assists individuals as well as business owners to return to business as usual. If you are an employee or have employees, you will find more assistance available than if you are a single, self–employed entity. At the very least, the assistance each of you needs will be easier to attain if you are employer and employee.
4. If you cannot pass the IRS 20 factor test, and you are working or allowing someone to work as a misclassified employee, you may be breaking state labor laws and IRS tax laws which can carry stiff consequences. I encourage you to Google your state’s labor website and read what your state says about misclassification and penalties. We have a duty to ourselves, our industry and our clients to operate legally and wholly above the law. The guidelines and parameters to measure this are clear cut; take the quiz for yourself and then consult a tax professional—but remember, unless you are using an (EA) Enrolled Agent, you may not be getting up–to–date advice from your tax professional. Tax professionals will give you tax advice; they are not labor law specialists. Which is why I would encourage you to inquire with your state’s Dept. of Labor office, sometimes called the Employment Task force.
3. Workplace rights are high on our top ten list. If you are an employee, you have the right to expect safe and fair workplace conditions. If you have employees, you have a responsibility to ensure that workers are treated equally, safely, fairly and within the parameters of our federal, state and local labor guidelines.
2. Because of situations such as COVID–19, there are federal emergency funds available to assist small businesses with employees. If you have groomers which you pay as independent contractors, you may lose out on valuable resources which may assist you in keeping your business afloat2. It’s also true that the independent contractor may realize they are misclassified and still be able to file for unemployment which will trigger an audit for that business.
1. If you are a groomer you deserve the privileges and rights afforded employees. And, if you are an employer, you deserve the rights and protections afforded employers in these uncertain days.
If you have been working as a groomer but without the protections afforded an employee, now is the time to demand your rights. If you are a business owner who is managing an on–going relationship with a groomer but paying them as an independent contractor, now is the time to alter your course and redefine your business practices.
They say it takes a village to raise a child—I say it takes an industry to impact change for the positive. History may say it took a virus to learn to navigate sustainable business practices. But whatever the takeaway, these are uncertain times and to make it through them, the better your business practices, the better your business. ✂️
2. SBA Disaster Assistance in Response to the Coronavirus, https://www.sba.gov/disaster–assistance/coronavirus–covid–19