Independent contracting is a unique arrangement where a self-employed individual operates within another organization, blending aspects of working for oneself and someone else. The relationship requires following specific rules, such as ensuring work is not a key aspect of the hiring organization’s business and maintaining consistent worker classifications. Independent contractors manage their own business operations, including setting policies, rates, and schedules, while negotiating contract terms with the hiring organization. Misclassification can lead to legal and financial consequences, but when done correctly, it offers benefits like autonomy for the contractor and reduced responsibility for the organization.
Key Takeaways
- Independent contractors are self-employed but operate within another organization, requiring clarity in roles and responsibilities.
- Businesses must follow IRS guidelines, ensuring independent contractors are not performing work central to the organization’s primary business, and all workers in similar roles must share the same classification (employee, contractor, or tenant).
- Independent contractors handle their own supplies, schedules, policies, rates, taxes, and client management while negotiating specific terms with the organization.
- Misclassifying workers can lead to audits, fines, and penalties, forcing both parties to refile taxes and potentially face financial setbacks.
- Independent contracting allows contractors to maintain business autonomy while gaining access to an organization’s client base, and organizations benefit from skilled professionals without full employment obligations.
If you’re an independent contractor, are you working for yourself or working for someone else? Yes. Independent contracting is an easily misunderstood working relationship. Why? Because you are self-employed inside someone else’s organization. So, yes, you are working for yourself while working for someone else, which is what makes it weird and easy to misunderstand. However, independent contracting can work for us if we understand it.
The Three Big Rules
Let’s start with the Three Big Rules. These rules govern whether you can even think about independent contracting (IC). The first two apply mostly to the organization doing the hiring. The last one is specific to the massage therapist.
Rule #1: is the work performed a key aspect of the business?
This comes straight from the IRS. In short, hiring a massage therapist as an IC is a great idea … unless your primary business is massage therapy. If you are a massage practice hiring massage therapists as independent contractors, you are taking a big risk if you are ever audited by the IRS, your state labor board, etc.
So, who can hire massage therapists as ICs? Chiropractors. Gyms. Yoga studios. Sports teams. They are not massage businesses so they can hire massage therapists as ICs.
If you are a massage practice, are you forced to bring massage therapists on as employees? No, there’s another choice I’ll talk about shortly in this article.
Rule #2: your massage therapists all have to have the same classification.
There are usually three choices (classifications) for massage therapists when they are working for someone else: employee, tenant, or independent contractor. Whichever way you choose to go, all your massage therapists need to be classified the same way. You shouldn’t have some who are employees, some IC, and some tenants.
Rule #3: Keep looking.
As an IC, you are working as an independent business inside someone else’s organization. One of the things a smart business does is look for more work/clients. You should not be relying solely on one IC contract for your income.
Do you also have a private practice? Do you do corporate chair massage? Are you marketing yourself? You should at least be trying to find other work/clients, whether or not you are successful. Don’t put all your business eggs in the basket of a single IC contract.
Making It Work For You
If you can meet these rules, then let’s take a look at the specifics of making independent contracting work for you.
Let me repeat: when you are an independent contractor, you are working as an independent business inside someone else’s organization. While you may be a business of 1, you still need to be operating as a business. In effect, you function like a private practice within someone else’s organization.
If you are an employee, you bring your skills and your experience (and your license, if required in your jurisdiction) to the job. The employer brings everything else: policies, tools, prices, dress code, etc.
If you are an independent contractor, you bring your skills and experience (and license) but you also bring your business, which includes your policies, prices, tools, etc. They may not be the same as the organization you’re working with, which is part of what can make it confusing and why you need to negotiate the contract.
Let’s get specific. This is some of what you do as an independent contractor:
- Provide your own supplies (except the table, perhaps)
- Do your own laundry
- While you negotiate the days and hours you will be on-site, you still manage your own hours and your appointment schedule
- Contact / re-schedule / cancel / schedule clients as necessary
- Choose your time off. You can alert the organization to extended absences, etc. as a courtesy
- Set your own rates
- Set your own policies
- Accept payment directly from the client
- Pay an agreed-upon % to the contracting organization (similar to rent)
- Do your own marketing
- Claim your business deductions and file your own taxes
Here’s what you don’t have to do when you are an independent contractor:
- Their cleaning or laundry
- Attend staff meetings unless you’re paid to
- Stay in the office if you don’t have clients
- Ask for permission to take time off
- Participate in their discounts or freebie events
The differences between how your business operates and how theirs operates means you’ll need to negotiate the terms of your IC contract together. Here are some specifics:
- What days you’ll be in the office and what hours you expect to keep
- How much notice you’ll give for absences, as a courtesy
- Whether you will honor their discounts, freebies, etc.
- How their staff should schedule clients for you
- What percentage of your income (it’s usually a percentage) you will pay them and how often
- Access to the office if you need to be there outside their regular hours
- The term of the contract (when it starts and when it ends; it can’t be open-ended)
- How the contracting organization will publicize your presence and availability
- How you will share client notes, if appropriate
Given the challenges of independent contracting on both sides, why would anyone choose it?
- The contracting organization gets a skilled massage therapist with very little responsibility for them. The trade-off is that they have virtually no control over the massage therapist, including how many sessions they do, which directly affects the contracting organization’s income.
- The massage therapist gets to be part of an organization that wants massage therapy (and, hopefully, helps fill their schedule) while maintaining control of private practice. The trade-off is the massage therapist is still responsible for all the work of running a private practice.
Another Option
There is an alternative to independent contracting that isn’t employment: being a tenant/landlord. Renting is like a fraternal twin to independent contracting – very similar but not exactly alike. What is the difference?
In the landlord / tenant relationship, the contract (a lease) focuses on the use of the space rather than the work performed. The landlord has virtually no engagement with the nature of the work being done, though they may have restrictions on certain kinds of businesses. You negotiate the length of the lease, the monthly rent, and a few other specifics around modifications and repairs. As long as your rent arrives on time, the landlord will usually be happy.
In fact, imagine you decided after three months that you really should be writing the Great American Novel. If you turn your rented room into a writing retreat, the landlord may not care as long as your rent keeps coming.
In independent contracting, the focus of the relationship is the work that you do, not the space. You make sure you are being put in a space that is appropriate for your work but otherwise, the contract spells out the details related to the delivery of massage services.
If you decide in 3 months that you’d rather use the space to write the Great American Novel, you’ve got a problem.
What It Takes To Make It Work
If you want to do independent contracting, there are a few things that improve the odds of it working well.
First, both parties must agree on how independent contracting works. There’s a lot of information floating around about what’s allowed and what isn’t and some of these sources don’t agree with each other. You both need to agree on how independent contracting works.
Both parties should interact business-to-business. They should not interact as employer to employee or even as landlord to tenant.
Both parties have to be comfortable negotiating. Leases and employment contracts may include some negotiating but the IC contract has the most points that need to be negotiated.
Both parties need to be confident as a business person and be able to hold healthy business boundaries.
The Risks
What’s the worst thing that can happen if you’re not doing independent contracting correctly? Maybe nothing if both parties are satisfied with it and neither of you is ever audited by the IRS, state labor board, etc.
The thing most people fear (reasonably) is being audited and found to be operating more like an employer and employee. If you are actually operating like an employer/employee, that trumps any written contract. In that case, there can be fines and penalties. The contracting organization may have to re-file their taxes for several years and pay into social security, workers comp, etc. for you.
And the independent contractor? They’ll have to go back and re-file their taxes for the years found to be done incorrectly. All those deductions they took as a private practice? They go away and the massage therapist may owe back taxes. There may be penalties and fines.
In short…
Independent contracting can work for us if we understand how it works. Take the time to learn the rules and follow them and you will both be happier.
About the Author
Kelly Bowers is the owner of the Healing Arts Business Academy (healingartsbizacademy.com) which specializes in helping massage therapists set up their private practice and navigate the first two years in practice. She is an author, presenter at regional and national conferences, an NCBTMB-approved provider of continuing education and a retired massage therapist. She lives in Durham, North Carolina. (NC 16669)