The first article ever on the PCA website was the one below by the former president of PCA, Richard Snyder. It's been used as an article that many of the posts on this blog have linked to over the past few years.

When the website was updated, it included an update to the blog as well. One of the pages we decided to remove was our articles page, since we only had 3 articles on it. Anne Notarthomas was able to get the previous blog posts to link to the article, which she put into its own directory. However, that meant that the only way people could see Dick's great article was if they saw the link in a previous blog post.

Thus, the decision was made to include that article in the blog, but without backdating it. This means the previous articles will still link to the other article, but from this point on any other articles referencing this one will link to this page.

We hope you enjoy the wonderful article from our long term former president.

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With the "consultative approach" being advocated in everything from selling to personal coaching, the question of who is a consultant often arises. My dictionary defines a consultant as "a person who gives expert or professional advice". That's pretty broad. My thesaurus defines it as "one who advises another, especially officially or professionally" and gives the synonyms adviser, mentor, and counselor". Better, but still not very specific.

The Professional Consultants Association of Central New York decided many years ago that a professional consultant is one who produces the majority of his or her income as a result of giving expert advice and specialized knowledge as opposed to selling a tangible or intangible product.

While that definition includes the familiar "management consultant", it also includes anyone whom a business or individual would pay to generate ideas, perform services or provide guidance - including CPAs, lawyers, personal or business coaches, engineers, designers, trainers, counselors, professional speakers, therapists, writers, and financial advisers (but only if they charge a fee for services and not a commission on sales).

That is not an exhaustive list but you get the idea. In short, a professional consultant is a person who is not an employee and who gets paid for what he knows and can do.

A consultant is an independent contractor and, as such, must meet certain IRS guidelines. The general rule is that an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done or method of accomplishing the result.

People such as lawyers, contractors, subcontractors, public stenographers, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. However, whether such people are employees or independent contractors depends on the facts in each case.

To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. All evidence of control and independence must be considered. In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered.

Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties as shown below.

Behavioral control

Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree.

Instructions the business gives the worker.

An employee is generally subject to the business' instructions about when, where, and how to work. All of the following are examples of types of instructions about how to do work:

  • When and where to do the work
  • What tools or equipment to use
  • What workers to hire or to assist with the work
  • Where to purchase supplies and services
  • What work must be performed by a specified individual
  • What order or sequence to follow

The amount of instruction needed varies among different jobs. Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right.

The training a business gives the worker. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods.

Financial control

Facts that show whether the business has a right to control the business aspects of the worker's job include:

  • The extent to which the worker has unreimbursed business expenses. Independent contractors are more likely to have unreimbursed expenses than are employees. Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. However, employees may also incur unreimbursed expenses in connection with the services they perform for their business.
  • The extent of the worker's investment. An independent contractor often has a significant investment in the facilities he or she uses in performing services for someone else. However, a significant investment is not necessary for independent contractor status.
  • The extent to which the worker makes services available to the relevant market. An independent contractor is generally free to seek out business opportunities. Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. An independent contractor with only one client is looked upon with suspicion.
  • How the business pays the worker. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly.
  • The extent to which the worker can realize a profit or loss. An independent contractor can make a profit or loss.

Type of relationship

Facts that show the parties' type of relationship include:

  • Written contracts describing the relationship the parties intended to create.
  • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay.
  • The permanency of the relationship. If the business engages a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that the intent was to create an employer-employee relationship.
  • The extent to which services performed by the worker are a key aspect of the regular business of the company. If a worker provides services that are a key aspect of the regular business activity, it is more likely that the business will have the right to direct and control his or her activities. For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. This would indicate an employer-employee relationship.

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Richard Snyder is the president of Cost Reductions Partners and former president of the Professional Consultant's Association of Central New York.

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