Are the therapists in your massage practice independent contractors or employees? In the world of massage, independent contractors are very common. That said, misclassifying your staff can be an expensive mistake. Independent contractors are basically self-employed. They set their own hours, have control over their workflow, and buy their own insurance. Whereas employees work within the guidelines, rules, and timeline, you set for them in exchange for benefits and compensation.
Characterizing staff members as independent contractors is commonplace in the beauty and wellness industries. This business model permits salon and clinic owners to maintain flexibility and save money. When massage therapists are independent contractors, clinic owners avoid the costs of payroll taxes, unemployment and workers’ compensation insurance.
According to the American Massage Therapy Association (AMTA), the characterization of therapists as self-employed is incorrect in many instances. In this article, we’ll discuss why worker classification matters and how to get it right.
What’s the Difference?
Employee vs Independent Contractor
Employers are free to choose a business model that relies on independent contractors. However, they must ensure that the actual work relationship reflects that categorization.
Massage therapists who are independent contractors have different responsibilities than those who are employed. It’s vital that you understand the difference, regardless of if you own your own practice or work inside someone else’s.
Here are some key differences between independent contractors and employees.
Massage independent contractors:
- Buy their own massage liability insurance
- Pay their income taxes either at the end of the year or make estimated payments quarterly
- May need a business license
- Set their own hours
- Control how many clients they see and how they engage with them
- Build their own client list
- Provide their own massage equipment, business cards, and other supplies
- Don’t get paid time off and are not entitled to benefit packages
- Pay self-employment tax
- Independent contractors receive 1099s at tax time
- Are covered by their employer's liability insurance
- Income taxes are withheld from their paychecks
- A portion of their social security tax is paid by their employer
- Are covered by the unemployment and worker compensation insurance provided for them
- Work within the hours set by the company
- Performs work tasks as directed by their employer
- Aren’t required to provide their own supplies or clients
- Receive benefits like vacation time, sick days, maternity leave
- Have access to health insurance through their employer
- Employees receive W2s at tax time
The primary difference between independent contractors and employees is control.
The IRS states 3 Common Law Rules for determining worker classification:
1. Behavioral: Does the company have control over how the worker performs their job?
- Employee: YES
- Independent contractor: NO
2. Financial: Does the company control how much the worker is paid and provide the necessary supplies?
- Employee: YES
- Independent Contractor: NO
3. Type of Relationship: Does the company have employee-type benefits like paid time off, maternity leave, and health insurance?
- Employee: YES
- Independent Contractor: NO
It’s important to note that there is sometimes a gray area between what’s true for independent contractors and employees. When classifying your workers, choose the classification that best fits your situation.
Which Model is Best?
Growing your massage practice with independent contractors or employees?
Growing your massage practice from a solo practice to a multi-therapist practice is a big step. Before you hire a massage therapist, decide which business model is the best fit for you.
First, assess how much control you want over your worker’s time and effort. Will you decide when your therapists work? Will you manage their schedule, or do you prefer therapists to be free to build their own schedules? Can you provide them with clientele, or will finding clients be up to them?
If you want to control when and how massage therapists work in your clinic, employees are the way to go. If you don’t want to micromanage other people, independent contractors may be the right choice.
Next, consider what kind of financial relationship you’re most comfortable with. Employees are your responsibility to take care of. That means you look out for them by withholding taxes from their paycheck, paying a portion of their Social Security tax, and paying for worker compensation and unemployment insurance in case they can’t work. Individuals who are paid a salary or hourly wage are typically classified as employees.
Independent contractors are responsible for themselves. They are responsible for their own taxes and are not covered by the company's insurance. They can also command higher fees because of that. An independent contractor’s financial risks and rewards resemble those of a business owner. The self-employed individual assumes more of the costs of doing business but shares in the profits as well.
Finally, decide how the relationship will be managed. Create a contract outlining each party’s responsibilities and obligations. Will you require massage therapists to sign a non-compete clause? If so, your staff are employees. Independent contractors are free to seek out business elsewhere while doing business with you.
Will you provide paid time off, insurance, or other benefits? These benefits could make staff loyal to your business. However, if you don’t want the cost of that, independent contractors are a more affordable solution.
Keep in mind providing benefits or wages is not the only indicator. Instead, government regulators look at the totality of the relationship. If your massage therapists can’t set their own schedules or control other aspects of their work, they will likely be considered your employees.
No matter which business model you choose, you need a system for managing clients and daily operations. Even if your massage therapists are independent contractors, systems keep everyone organized and clients happy. The best way to create a predictable client experience is to use clinic management software like ClinicSense.
ClinicSense makes it easy for clients to book appointments, staff to view their schedules, and business owners to track revenue. You can even adjust security settings to allow or restrict access for staff members. This works both for employees and independent massage therapists.
What it Looks Like in Practice Examples
Are your massage therapists independent contractors or employees?
Determining whether someone is an independent contractor is a fact-based inquiry. A worker can be classified as an independent contractor only if their employer doesn’t control what work is done and how it’s completed. A worker is not considered self-employed unless the work relationship meets the necessary criteria.
The massage therapists at Massage On Main are independent contractors.
Massage On Main is owned by Sarah Smith. She has 3 massage therapists working with her in her clinic. Sarah owns the building and furnished the whole place. However, massage therapists are responsible for laundering their own linens, supplying their own massage cream and any other supplies they need.
Each therapist makes their own schedule, markets themselves, and has their own way of doing things. Their business cards have their personal phone numbers on them, so their clients can contact them directly. They can take time off any time they want, but it means no income during that time. The massage therapists enjoy freedom and flexibility, even though they have no paid benefits.
The massage therapists at Healing Hands Health Spa are employees.
The therapists at Healing Hands Health Spa wear matching uniforms and work a split shift. Half the therapists work from 8:00 am to 2:30 pm, and the other half from 2:30 pm to 8:00 pm. Every therapist follows a protocol for treating clients, cleaning treatment rooms, and taking SOAP Notes.
The owners want every therapist to be highly skilled, so they reimburse massage therapists for continuing education. New hires are offered a sign-on bonus and access to health insurance and are eligible for 2 weeks of vacation after 6 months of employment.
What Happens if You Misclassify Your Workers?
Getting your workers’ classification wrong can be a costly mistake. Society for Human Resource Management’s Lisa Nagele-Piazza explains that even minor mistakes made by a business owner when classifying and paying workers can result in IRS tax liabilities and penalties under the Fair Labor Standards Act. In some circumstances, misclassified employees may be entitled to claim back wages and overtime.
Employers who have avoided paying for unemployment and workers’ compensation insurance by classifying their employees as independent contractors may find themselves owing their state, as well.
The IRS publication, "Independent Contractor (Self-Employed) or Employee?" notes, “it is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.”
Tax forms submitted to the IRS each year declare the classification of the worker. Independent contractors receive form 1099 from businesses that paid them. Employees receive form W2 from their employers. Filing the wrong paperwork can get you into trouble.
Employers cannot choose to classify an employee as an independent contractor if the appropriate federal or state rules are not met. Nor can an employer and employee form an agreement that waives these conditions.