Which Costs More? Pet Sitting Employees Vs. Independent Contractors
MYTH: It costs more to have employees vs Independent contractors. FACT: That all depends on the business owner.
I have seen pet sitting companies do all sorts of things over the years I have been coaching them.
Some IC companies paying 60%, 70% or even 80% saying “that is the going rate.” For the life of me, I could never reallyunderstand how any business could be in the black and paying this much in labor. I’ve done the math.
If one has a company paying 70% and then they add on the average expenses of 30%* of total revenue, then all the business is doing is breaking even! There is absolutely no money being made for the business, or the business owner. They are doing all that work, day in and day out for nothing! You could go to McDonald’s and get paid more as a manager and get benefits. I have done that research too.
Everything is relative to each in individual company.
To say that employees cost more…. Is only a half truth. It is true that there are costs associated with employees but if it is all worked into a businesses pricing structure, it really isn’t a big deal.
What is a big deal is the insurance. Independent contractors should have their own business insurance. They should have their own worksmans compensation policy. They are their own business and need to protect themselves in case something happens, right? Unfortunately, more times than not most independent contractors I come across in the industry are being treated and acting like employees.
True Story #1
Almost four years ago, one of my staff was visiting a daily dog client. She saw this dog M-F every day. One day, this senior dog decided to comp down on her hand and it caused her to end up in the ER, physical therapy, and time off. Workmans compensation kicked in and took care of the bills and even compensated her for the time off. Here is the full story and details.
Had this person not been an employee a myriad of things could have happened:
– They asked the company to pay the bills (totaling over $30K!)
- They would have been upset and asked the company to pay their lost wages, or sued.
- They could have submitted a claim wit the department of labor claiming they were employees and thus should have been covered by insurance.
- They could have tried to go after the homeowner, potentially giving your company a bad name.
With independent contractors the outcome is unknown.
The future, in my opinion, is a risk in the pet sitting business.
“Just like having a professional pet sitter care for their pets gives our clients peace of mind to go on vacation, having employees instead of independent contractors gives us peace of mind in our business. For us, that peace of mind is worth cost of payroll, workers compensation and uniforms.” – Tori, Endless Pawsibilities
TRUE STORY #2
Let’s say that your staff are all dog trainers. They never make a mistake in reading pet’s body language and they are the most perfect pet sitter this world ever saw! BUT they were walking down the front stairs and slipped on the last step, fell on their bottom, but in the process broke their ankle…. The same foot they drive with.
If they were and IC:
- They can’t drive, they can’t work, and they have all those medical bills piling up.
If they were employees:
- Your workmans compensation kicks in, pays them, pays their medical bills, and manages the entire situation.
Which problem would you rather manage? Of course, the homeowners insurance would be involved in either situation but their job is to try to accept the least amount of liability. So even though they might pay out some… they will not accept 100% because it was a business coming onto the property. PLUS, if you have workman’s compensation, the WC agent deals with it all. Not you or your IC. You also help make a horrible situation much smoother.
“When I really calculated the costs, and weighed the risks of remaining with ICs, going to employees was a no brainer!” – Julie F. The Pet Sitter Of Boise
End Result. Bottom Line Is…
I always say that the age old debate about ICs v Employees comes down to one simple question.
How Much Risk Are You Willing To Take?
Once you can answer that, you will be able to make an easy decision on which model appeals the most to you and your business.
My Help For You:
If you are ready to reduce your risk, and been looking for a way to transition your ICs to employees or just want to start hiring employees…. Then the Employee Quick Start will help you from A-Z. 60 pages full of info you can use. Step by step with worksheets and 2 hours of audio for those of you who like books on tape!
*30% expenses based off of the average of what I see in all the businesses I coach.
I am confused as to how you are spending 30% of total revenue on expenses. I have always kept a close eye on that for my business, and I generally spend 6 to seven percent on expenses. (This does not include taxes or travel, but those expenses are paid by the independent contractor, so I don’t think they should be included in your calculation.) I have always paid my independent contractors 70%, but since I am spending 6-7 % on expenses instead of 30, I am still making more money than someone paying their independent contractors 50% and spending 30% on expenses. I think that spending money on your employees or contractors is the best investment you can make in the long term, so I really think one would be better off spending less on expenses and paying people who work for you more than paying people less because your expenses are so high that you can’t afford to pay people more. Cutting the pay of the people who make your business successful should be the last thing you cut.
You can most certainly do it that way. But I believe in building FOR profit businesses, not NON profit businesses. I also believe that my clients should have healthy savings accounts. You need money to spend on the business.
The IC model is really where the disservice is at in the industry. If they are injured or need PTO, where does that come from? Not your 7%. In fact, it has been ruled in many states that ICs are not in compliance in many states. Rather than focus on the expense category… I would examine how you are classifying your workers. I mean this in no disrespect and offer a conversation through one of my 20 minute calls if you would like. I am not here to convince you of anything though. What you chose to do has no impact on me. I have done an entire case study on people who have been audited in our industry. I know what I am talking about 🙂