I am toying with the idea of making my teachers part-time employees versus independent contractors. A neighboring studio owner contacted me about a teacher of hers whom she pays as a contractor (1099 income) threatening to report her to the Labor Department about her payment practices. How should we proceed? Any guidance would be most helpful. —Lesley
I’m glad you asked this question because I think a lot of our readers may be in the same boat as you on this issue. Although I am not an expert in tax laws, it is my understanding that all employees, whether part-time or full-time, should receive W-2 forms. What’s important is to distinguish whether the people on your staff are employees or contractors.
Speaking simplistically, someone who works the same day(s) and hours every week (even if it is only a couple of hours) is considered an employee, while someone who is brought in occasionally (for example, a master teacher or guest choreographer) would be a contractor. According to the Department of the Treasury/IRS Employer’s Supplemental Tax Guide (Publication 15-A), another primary factor is whether the business owner has a right to direct and control how the worker does the task she’s hired for. If so, the worker would be considered an employee.
An exception would be if the worker has established a corporation with a Federal Identification Number (FID), in which case your checks would be made payable to that corporation and not the worker. This is most common when such people teach at several schools or are master teachers. (For more info, read “What’s in a Title?” in the July 2009 issue of DSL.)
I have gained this knowledge from school owners who have had difficulties with the IRS because they paid their full- and part-time employees as contractors. Most didn’t understand the law and some were trying to avoid paying the additional taxes associated with employee payroll. What usually happens is exactly what you described: an employee goes to the Labor Department or attempts to collect unemployment, and it opens a huge can of worms for the school owner. In some cases, the IRS will require payment of back taxes for the years when teachers who were paid as contractors should have been filing as W-2 employees.
Avoid these issues by consulting an accountant or another expert on the tax laws to discuss your particular situation and then begin the process of transitioning your contractors to employee status. I wish you and your friend the best on this. —Rhee
I attended your Project Motivate seminar in Michigan with my sister and mom, who own a dance studio together. We found the seminar very informative. On our way home we came up with one more question. You talked about not letting your students’ accounts get behind. We do remind parents that they need to stay current with their accounts, both personally and with email. But what do you do about those parents who ignore your reminders and drop off their children to dance without coming into the studio? We don’t mind confronting the parents, but when they use their child as a pawn to hide from us, that is hard to deal with. Eventually we do get them to pay, but sometimes it’s several months later. What do you suggest? —Michigan
I agree that children can be the victims when parents are delinquent on their tuition payments, and in such situations I sympathize with both the school owners and the kids. The parents at your school do not respect your payment policies, nor do they understand that you have financial commitments to meet that require that they pay their bills in a timely manner. When they registered their children at your school, they were making a commitment to abide by the policies and payment plans you set forth.
When parents are more than two months behind on tuition, I suggest making a phone call to remind them that it is the school’s policy that their children cannot attend class until all outstanding balances are paid in full. Making a phone call protects the children from the embarrassment of coming to the studio and discovering that they can’t take class.
You should offer these parents a payment plan or any other option that you can arrange in order to allow the children to keep dancing. However, if the parents are unable or unwilling to pay for your services, under your terms, then you must respect your own policy and your clients who are paying their tuition in a timely manner by requesting that the children not come back to class.
One way to avoid this circumstance altogether is to offer parents the option of automatic payment via debiting their checking account or charging a credit card. This allows you to collect monies due to the school on an agreed-upon day of the month. If the client’s credit is good, this is an option that allows you to completely avoid the issues associated with late payments. Consider making it a policy that any parents who have not paid tuition for two months must go on the automatic withdrawal system after they’ve paid their outstanding balance.
Your clientele must regard paying for their children’s dance lessons as a commitment like any of their other expenses, and you should not feel guilty if they choose not to do that. All the best to you. —RheeDear Rhee,
I have a school with a little more than 200 students. Registrations are still coming in, so I know I should feel good, but the start of the season has been hard because of my competition team dancers and their parents. I work with about 30 kids who participate in five competitions per year. We are known for our strong talent and we usually come out on top at most of the competitions. I have to be very careful about who represents the school when we compete, so I can’t put students who aren’t up to par on the stage. We are known as a winning school and it has to stay that way for my business. I have tried to explain this to the parents of the kids who haven’t made it on the team and they just don’t understand. How do other teachers handle this issue? Or do you know of any magical words I can use? So far I have lost seven students because they didn’t make the team. —Sandy
You asked for my help, but I’m not sure you’ll like my response. Is it more important to you to be a winner than to do what is right for your students? In determining who is good enough for your team, are you taking into consideration only the winning tricks they can do? Is potential or passion in the mix? Have you thought about how you might be having a negative influence on the development of self-esteem in the students who don’t make it onto your elite team? As teachers, we can’t be focused on what’s good for our egos at the expense of what’s right for our students.
I am sure you will continue to lose students who do not meet your winning standards. How would you feel if your son was on a baseball team with a coach who never played him because he wasn’t good at bat? You would probably think that your son will never improve unless he gets the chance to be at bat. How will the dancers who don’t meet your standards ever get stronger if you don’t expose them to the learning experiences that come with performing or competing?
In my opinion, it is time to get rid of any embarrassment you might feel if your kids don’t win. Instead, sit at the competition thinking about how much good you are doing for all of your students who have the passion, not just the ones who will bring home a trophy. Please! Good luck. —Rhee