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How to Reduce Payroll Expenses

Many businesses spend a great deal of time and effort formulating ways to increase profits by expanding markets and increasing sales. While producing more revenue is a time proven way to increase profits, it is the actual bottom line of a company’s profits and losses that ultimately determine the success of the business. There are certain types of businesses that are limited in how much they can expand in their marketplace or the level to which they can increase sales volume, and for these types of companies, finding ways to streamline operations and reduce expenses is almost as important as increasing productivity and sales volume.

Start by Managing Productivity

Minimizing expenses for any company is an ongoing process that requires a constant effort because the natural inclination of nearly any business is to have expenses gradually increase. Along with increased expenses comes the inevitable decrease in efficiency and productivity if employees and the general operation of the business are not closely monitored on a consistent basis. One of the ways that company managers combat decreasing workforce efficiency and escalating company expenses is to make use of independent contractors to reduce payroll expenses and increase productivity.

Independent Contractors Reduce Benefit Costs

Independent contractors are contracted to perform certain tasks for a company for a specified period of time. They are not classified as employees but are considered a type of outside service that is contracted to come in and solve a problem and then leave. Independent contractors can reduce a company’s payroll expenses dramatically because independent contractors do not require:

  • benefits,
  • vacation time,
  • sick leave, or
  • heavy managerial oversight.

Independent contractors are professionals that come in to complete a specific task and their reputation is based on how well they perform. This reputation is what allows them to expand their own business so they are particularly concerned with completing tasks in a timely and efficient manner. This translates into greater productivity for the business.

Classification Is Key to Steering Clear of the IRS

Not every company can make use of an independent contractor to perform specific tasks. Classification of independent contractors can be a somewhat gray area for many companies and it is important that a company not misclassify a position as that of an independent contractor when it should be classified as an employee. This can have serious repercussions with the IRS. When in doubt, a company should consult with an attorney familiar with labor laws to ensure that what should be classified as an employee is not classified as an independent contractor.

How LegalNature Can Help You with the Necessary Legal Forms

LegalNature can help you with all of your personal legal form needs. Let us help you get started today. Click here to create your independent contractor agreement now.

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