Independent Contractors

1. 1

   The focus of this report is small business use of independent contractors to perform three
   different types of functions – construction, transportation, and computer services.

2. 2

   Twenty-one (21) percent of non-construction small businesses engaged an independent
   contractor in the last three years to do construction-type work for their firms.

3. 3

   Half of small business owners bid their construction jobs; half did not. Of those soliciting
   bids, price was the most important factor when selecting the bid winner in only 16 percent
   of cases. Quality (workmanship) was important more often as was a prior relationship. The
   lowest bid won in one-quarter (28%) of cases.
   

4. 4

   Small business owners were generally satisfied with construction work done for them. Sixtythree
   (63) percent would definitely hire the contractor again, 28 percent probably would.
   Just 4 percent definitely would not.
   

5. 5

   Twenty (20) percent of non-transportation businesses have employed at least one person
   as a driver in the last three years to deliver, haul or otherwise move things or people for
   the firm. The most frequently cited very important reasons for hiring employees rather
   than using independent contractors were the flexibility employees bring, their reliability and
   accountability, better coordination with other activities in the business, and greater control
   over times, routes, etc.
   

6. 6

   Twenty-one (21) percent of non-transportation businesses have used independent contractors,
   excluding the U.S. Postal Service, UPS, FedEx, etc., and large over-the-road trucking
   firms to fill their delivery or hauling needs. The most frequently cited (overwhelmingly) very
   important reason for using independent contractors rather than employees was the absence
   of need to invest in vehicles, insurance, and similar overhead. Other very important reasons
   often cited were deliveries are too far and varied and the irregular flow of shipments.
   

7. 7

   In the last three years, 8 percent of non-transportation firms employed both hired employees
   and independent contractors to perform their necessary transportation functions.
   

8. 8

   Twenty-three (23) percent of small businesses employed people in the last three years to
   install, service, repair or instruct people in the use and maintenance of their computers and
   other information technology equipment. The most frequently cited very important reasons
   for using employees rather than independent contractors were greater control over performance
   and quality, reliability and accountability, helping others keep up with the technology,
   and concern over delay and timeliness of response among contractors.
   

9. 9

   Forty-two (42) percent engaged independent contractors to perform computer services.
   The most frequently cited very important reason for use of independent contractors rather
   than employees is that different problems require different expertise and the skills brought
   in are needed for only short periods of time.
   

10. 10

    Eighteen (18) percent have hired both employees and independent contractors to fill their
    computer services needs.
    

11. 11

    In both transportation and computer services, employee cost is usually a less important factor
    in the decision to select employees or contractors to perform the work than other factors.
    Cost is cited as a very important reason for choosing one as it is for choosing the other.

Volume 8, Issue 6, 2008
ISSN 1534-8326

William J. Dennis, Jr.
NFIB Research Foundation

• 1Within the last three years, have you engaged any contractor to remodel, renovate, install, or do construction-type work on your business premises or facilities that amounted to $10,000 or more?
• 2Have you done this type of construction work on your business premises or facilities once in the last three years or more than once?
• 2aDid you hire the same person or firm in all cases or different people or firms to do different jobs?
• 3Approximately, what was the total value of that job?
• 4Did you put the job up for competitive bid?
• 4aWhat was the primary method used to invite potential bidders?
• 4bAbout how many bid packages or sets of specs did you send out to potential bidders?
• 4cHow many did you actually receive?
• 4dWere you very satisfied, somewhat satisfied, somewhat unsatisfied, or very unsatisfied with the bids you received?
• 4eWhat was the single most important factor that influenced your choice of the winning bid? Was it:?
• 4fWas the bid you selected the lowest priced?
• 4gWhy didn’t you put the job out for bid? Was it because:?
• 4hWas the contractor you used a person with a Social Security number and perhaps an EIN, or was the contractor a business with a name and a business tax ID?
• 4iDid you have a written contract with that individual or business, not including a service agreement of some type?
• 4jWas the contractor bonded?
• 4kWould you definitely, probably, probably not, or definitely not use this contractor again?
• 4lIf the job was completed in 2007 or before, did you send that contractor a federal form 1099 at the end of the year?
• 5In the last three years, has your business employed, either full-time or part-time, a driver or drivers to haul, deliver, transport, or ship goods, commodities, products, packages, waste, messages, or people?
• 6Is driving, hauling, transporting, or delivering goods, commodities, products, packages, waste, messages, or people the primary activity of your business?
• 7A(reason for employee vs contractor) Greater control over times, routes, and performance
• 7B(reason for employee vs contractor) Employee(s) are cheaper
• 7C(reason for employee vs contractor) A steady flow of things to transport
• 7D(reason for employee vs contractor) Had underused resources, such as an underused vehicle or employee, available
• 7E(reason for employee vs contractor) Can better coordinate with other activities in the business
• 7F(reason for employee vs contractor) Employees are more reliable and accountable
• 7G(reason for employee vs contractor) Gives you more flexibility
• 7H(reason for employee vs contractor) Delivery or haul area is relatively small
• 7I(reason for employee vs contractor) Transporting is a potential profit center
• 8Not including the Postal Service, UPS, FedEx, DHL, or similar carriers, in the last three years, has your business engaged another firm with a driver or drivers, or a single person known as an independent contractor to ship, haul, deliver or transport goods, products, commodities, waste, packages, o...
• 9Of all the goods, products, etc., that have been shipped, hauled, delivered, or transported for your business by NON-employees in the last three years, approximately what percent of your shipping costs was spent with the Postal Service, UPS, FedEx, DHL, and similar carriers? Was it closest to:?
• 10Not including the Postal Service, UPS, FedEx, DHL, and similar carriers, would you describe the contractor you most commonly use or used as a person with a Social Security number and perhaps an EIN, or was the contractor a business with a name and a business tax ID?
• 10aDid you, or do you, have a contract or written agreement with that person or business to perform those transportation services? An account number is not a written agreement.
• 10bDoes that person or business work for you frequently, occasionally, or infrequently?
• 10cIf that person or business worked for you in 2007 or before, did you send them a federal form 1099 at the end of the year?
• 10dADon’t have to invest in vehicles or pay insurance
• 10dBMy shipping, delivery, or haul flow is uneven
• 10dCTough to screen and hire qualified drivers
• 10dDOutside contractors are cheaper than employees
• 10dEWe have no experience in transportation
• 10dFHelps cash flow
• 10dGShip relatively little
• 10dHDelivery locations are too far or varied
• 11In the last three years, has your business employed a person or persons to install, service, repair, and/or instruct other employees in the use and maintenance of your firm’s computers and information technology equipment?
• 11aAGreater control over performance and quality
• 11aBEmployee(s) are cheaper
• 11aCThe work flow is steady
• 11aDHelps other employees stay up-to-date on the equipment
• 11aEMore reliable and accountable
• 11aFHelps find new and better ways to use the technology in the context of our business
• 11aGNo waiting for a repair tech or problem solver to get here
• 11aHHad a person already on staff who was interested and skilled on computers
• 12In the past three years, has your business engaged an outside person known as an independent contractor or another business to install, service, repair, and/or instruct other employees in the use and maintenance of your firm’s computers and information technology equipment rather than having an em...
• 12aWould you describe the contractor you most commonly use or used as a person with a Social Security number and perhaps an EIN, or was the contractor a business with a name and a business tax ID?
• 12bDid you, or do you, have a contract or written agreement with that person or business to perform those computer services?
• 12cDoes this person or business work for you frequently, occasionally, or infrequently?
• 12dIf that person or business worked for you in 2007 or before, did you send them a federal form 1099 at the end of the year?
• 12eAComputer people need constant retraining and we can’t afford it
• 12eBDon’t need such skills very often
• 12eCTough to screen and hire qualified computer people
• 12eDOutside contractors are cheaper
• 12eEWe have no experience in computers and IT
• 12eFHelps cash flow
• 12eGEasy to get rid of if they don’t work out
• 12eHDifferent problems require different expertise
• 12b1Is that document a service contract that came with the purchase of computer hardware, software, or attachments?