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Change to Commission Only Employee? Idaho

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  • Change to Commission Only Employee? Idaho

    We have a salesperson in Idaho that is currently a full time salaried employee. After our budget meeting it was determined that either he will be terminated or he will be commission only employee.

    He would be given a 600 per month draw against commission.
    He would only be paid commisson on the sales he would achieve. Unfortunately I don't know if he would even make the minimum (the 600 draw per month) since he hasn't achieved this consistently in the 3 yrs he's been here.

    Normally, in my opinion it would be more feasible to just have him an outside consultant and issue him a 1099 at the end of the year to avoid having to pay WC and U/E withholdings.

    Any opinons on this situation? We've never had a commission-only employee and am confused on how the withholdings are handled in such a case. Personally I think we should just go the 1099 route.

    Opinions, comments, answers are much appreciated.

  • #2
    An employee is an employee. You can't make an employee into an independent contractor just because you think he won't make enough in commissions to cover the draw.
    http://www.irs.gov/businesses/small/...=99921,00.html
    I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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    • #3
      Originally posted by Pattymd
      An employee is an employee. You can't make an employee into an independent contractor just because you think he won't make enough in commissions to cover the draw.
      http://www.irs.gov/businesses/small/...=99921,00.html
      That's not the reason why but thank you anyway.

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      • #4
        So, why DO you think you can make him an independent contrator and what is your logic behind this idea?
        I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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        • #5
          I work for a company that is intertwined very deeply with Employees and Independent Contractors both. I am here to tell you from first hand experience that you cannot just switch someone from one to the other. If the employee is agreeing to this, that is a different story. But technically you would need to 'let the employee go' and take them on as an IC. Which means that they would need to understand that they are responsible for a lot of things which may end up costing them more in the end. IC's are responsible for their own insurance, both health and liability, their own taxes, etc. Just make sure that you understand that this person could be losing a lot of money upfront by agreeing to this deal. I would say from human being to human being, if you are looking to let this person go, and this is the easiest way out, just let him go. If he isn't that great of a sales person, he may end up broke before it is all said and done.

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          • #6
            This is all due to budget. Keeping a person on payroll that is not pulling his weight and being that he's been with company for a while they don't just want to terminate him but give him a chance so the option will be presented to him to either go on a commission-only basis or be an independant contractor/salesperson. This is the reason behind this all and my question was just to find out what, if anything I need to know/do if they throw him on a commission-only basis.

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            • #7
              You can't just make someone an IC no matter what your reason. They have to meet the IRS definition.
              The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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              • #8
                And being commission-only does not make him an independent contractor, either. If he was an employee before, and he's doing the same job, he's an employee now, regardless of the pay method.
                I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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