Discussion #3956

Employee vs. Contractor

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The AB5 Law is now in California. What does this mean for Pilates studio owners and teachers? In this discussion, John Marston talks to Katie Santos, who is a business consultant for Pilates studios, about what this law is, how it impacts us, and how to classify employees vs. contractors. She addresses the pros and cons of the law for the studio and teachers as well as other changes that may come in the future.
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Nov 25, 2019
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We're here today to talk about a new piece of employment legislation that is impacting Palladia studio owners and Paula, these teachers here in California. This law is a California law, but we believe that it is going to impact potentially in the future. Many of the States in the USA. I am here today with Katie Santos who is a business consultant and she specializes in this area. My name's John Marston and I'm the cofounder with Christy Cooper of polarities any time. Katie, can you tell me a little bit about California law AB five thanks for having me, John.

So AB five really represents a radical change in how we conduct business in the wellness industry, fitness studios, Pilati studios, and it really changes how we classify the people that work for us away from independent contractors to employees. There's three main focuses in this law now. A is a question of does the person that you work for control in any fashion, the work that you do, and something can be said about maybe work arounds to that portion of this law be is a really problematic area of the law itself. And that States, does your work directly contribute to the health and vitality of the business itself? In other words, would the business go under without your work? C is, does the worker have a business within a similar industry itself?

So let me elaborate a little bit if I can. A really says, does the worker, is the worker controlled by the place where they are working? So for some of us in the [inaudible] world, maybe we would like to control how people work for us. But overall we hire trainers because they're professionals and they really understand how to do the work that they do for us. And that law or that section of the law really can be circumvented to some degree. But it's be, that's the real problem.

And the real focus of everyone in the industry now and that section of the law means does my work contribute directly to the health and vitality? Like I said, of the business. So let me give you an example. If I own a Pilati studio and I hire a graphic artist or a bookkeeper, their work doesn't contribute really to my ability to keep my business going. It's important, but I can survive without those two people. So the definition, those two jobs is one of an independent contractor. Now conversely, if I'm a Palladio studio owner and I hire a [inaudible] teacher, she or he contribute directly to the vitality of my business and my businesses survival. So that section of the law says that they are employees, see is a little bit more obscure and that section of the law says, does this person have a viable business of their own that is similar to what my business is? So an example, there would be a Palladio's teacher that works for, say, my studio as an independent contractor.

Perhaps she owns a studio in another town away, but she doesn't have enough business yet to make that studio viable. So she's getting some extra money from me. There could be an argument made that she could be considered an independent contractor. Now, the tricky part of all of this is as this law is rolling out, these sorts of tests are unproven and until those start um, start winding their way through the courts, we really won't know as an industry whether we are in a safe spot to consider someone like this latest example as a employee or an independent contractor, when does the law go into effect? So this has been around as a ruling since about 2017 and it goes into effect January 1st of 2020 when it goes into effect. We're not going to know a lot about how it directly affects us as wellness business owners and as [inaudible] studio owners until decisions kind of wind their way through the court system.

The challenge for me is I want to make sure that the plotty studios and the other studios that I consult with stay as safely as possible on one side of the fence for as long as possible because we don't have a cadre of lawyers and accountants behind us that we can spend money on to help change this law as it goes into effect. If my studio is not based in California, why should I care about this law? That's a really good question. California is at the forefront of a lot of things and as far as I know, there's about eight States right now that either have a similar law or are working at putting a similar law into effect. And the minute this comes about in California, I can promise that there'll be a number of different States following suit.

Are there any workarounds for this law? It's very interesting. In my consulting, I've had a couple of unique cases come about. One particular studio has created a license agreement with the people that work for them. So basically the, those workers are licensees of the studio and it's work. Now this is something that costs them quite a bit of money in attorney's fees. Um, they are getting paid as I understand it, monthly these license fees, but that's something that's unproven.

The other scenario is there's a studio I'm working with who they own the building. There's a real estate company that owns the building, but the people that own that real estate company don't work inside the business itself. So each of those workers is contracted with that real estate company to be renters. Again, unique work around, but something that's unproven and like I said, I would, for me, we changed over 13 years ago because I wanted to stay sleeping at night and not be too stressed out. And even the laws as they were written then kind of, you know, most studios were kind of skirting things a little bit with independent contractor usage. Then in the case of the studio where they're renting the space to people, the owners of the business are not in any way involved in, in as Pleiades teachers. Is that [inaudible] correct? That's correct. And that one use case, I do know there's another studio that's trying to do that same work around, but the studio owner who also works in the business is a part owner of that real estate company. So that's where I just went, you know what? That's not, it's not in my scope of practice. That's an attorney thing. You know, so those kinds of unique cases I would suggest getting an attorney's advice, but again, unproven [inaudible] if I'm a contractor and I own my own company, is that a way of getting around the law? It's not clear. Um, like I said, that kind of falls in that, um, C of the ABC portion of the law and it's not clear whether that automatically creates an, a um, contractor status. Again, safest bet for me would be to make that person an employee. The other, um, use case I've heard from different studios are, well, this person only works for me two hours a week.

And that doesn't automatically make you an independent contractor either whether you own your own business or not. I, one of the workarounds that I've heard is that [inaudible] teachers can get together and create basically a cooperative where they all own the business together. Um, can you talk about that particular structure? That's certainly something that you can do and it's something that's been done in the past. The studios that I've known, that would mean I'm taking, let's just say by example, a current LLC that owns a studio. And finding five other teachers to go with the current owner, reforming the company itself into a different LLC with six owners that all work in that studio together. But that also means that should they decide they need a seventh person working there or a teacher leaves or a co op owner leaves and brings in another one. Then either that new person has to be an employee or you need a change of ownership of that new company.

Now to involve that seventh person. So it's really not very flexible if you expect people to be joining and leaving as teachers. I would agree with that. I would agree with that. You know, and creating a whole new structure means a totally different dynamic. Now let's say you've owned your studio by yourself for 10 years and suddenly you've got five other people kind of as a collective telling you what to do. That it could be great, it could be kind of crazy, I don't know, but the new teachers might have to buy in to have their share of say the equipment that's in the studio and it sounds pretty complicated to me.

I think so. I think the simpler answer is make your people employees, if I'm hearing what you're saying correctly, it's pretty difficult to work around this law in my opinion. It is. And I know that, um, there's a few opinions out there that state, you know, I don't want to have employees at all my people that work for me don't want to be employees, but in my opinion, we really don't have a choice. And I also look at this as something that's not only good for the studios themselves, but for employees. You know, if you're like me, I don't have a lot of margins, my business partners and I to give our employees benefits or to give them 401ks despite trying. So if I can bring them on his employees and know that they at least have sick pay and they have protections in the form of worker's comp if they need it and have liability, not liability, but of disability insurance, should they get injured, that makes me sleep a little bit better at night. And at least I know I'm taking as good a care as I can of my employees. Yeah, a lot of studios host visiting teachers that come and teach workshops.

Uh, is that visiting teacher considered to be an employee? This is a huge issue. I have a studio now that I'm working with. It's currently going through an audit and it's almost a matter of did this auditor wake up on the wrong side of the bed because she's really getting put through the ringer. Her example was she had an outside visiting person come and do a talk for her students. It was a three hour, one time talk.

She was never going to have this person back. And it w this talk was not related to the business itself in any way. The um, employment development auditor considered that visiting teacher and employee for that one hour visit. So my goal in working through all of this is try to get in front of legislators that can help us draft language around how we work as a wellness industry. Like I said earlier, this was kind of just thrown at the wall to cover all sorts of industries and the legislators really didn't have any kind of understanding of how different industries work.

And not just ours and it's really a new day, a, a more entrepreneurial, um, world that we live in than we did when unions were coming about and creating employment laws. So there needs to be a little understanding and latitude and change in language of how we do our work as wellness practitioners. There are studios that have nothing but visiting workshop teachers. So 1440 that's up in Santa Clara. That's their business model. I know speaking for our studio, we like to have visiting teachers in, do I have to make Lolita, San Miguel an employee when she comes in to teach at my studio?

I dunno. We don't know yet. We all use substitute teachers. What's going to happen about substitute teachers? They, they might only work for us for a few hours. That's true. Safe bet in my opinion, is that you make that sub and employee. As long as they're not actually working, working, it's not going to cost you anything to carry them on to the payroll roles. We've done that with the people that sub for us. I don't have a lot, but they're employees for us.

So if I'm a studio owner, tell me about the things that, what, what's the pros and cons of this? What's going to happen to me when I begin to implement this change? So it can be really scary if you've never done this sort of thing before. I know for us when we made the change 13 years ago, it was a little bit scary and a little bit daunting, but the reality is you can structure it so it doesn't really cost you as much as you might think. And it's not as stressful to put this into play as you might think for us.

And we had an immediate change in that. We felt like we weren't sitting in the office kind of going, Oh, what is that girl teaching over there to that client? So that was an immediate benefit. We could, you know, direct and mentor our teachers to become part of our team. If you fast forward 18 months or so in our studio, we saw a lot more revenue. And I thought I had this kind of thought that well I've done the right thing by the people that worked me. So the universe has provided, well that was really kind of stupid.

What I realized was the clients that were in our studio had a much more consistent experience because we weren't directing people a lot, but we were guiding them to work in a fashion that we felt spoke to our mission and our objectives as a studio and what we wanted our ideal client to experience when they came in. Now cons, yes, it costs a little bit more money. We actually shared that with the employees that we brought on. Um, and there was a benefit to them as an employee. They now get sick pay. They didn't, when we converted, they are relieved from having to pay their own liability insurance. Most of the time they have worker's comp.

So if God forbid they fall off the trap table, they're covered and they have that disability insurance if they're injured and not able to work. I mean these are protections that we've struggled with as wellness business people and wellness workers. We don't usually get those employee benefits unless we're working for a bigger outfit where we don't have the autonomy that we like when we work for a different, for a small studio. Can you talk to me about the pros and cons of this change for polarities teacher? So in the past as an independent contractor, you've had the opportunity to write off a lot of the expenses that you might have as an independent contractor.

The recent changes in the tax law have really gotten rid of that altogether, so the opportunity to itemize your deductions is really pretty much gone. So now as an employee, even sharing the burden of bringing, bringing an employee on with the studio, you end up in a little bit better position from a tax standpoint as a now employee. In addition, like I said, you've got sick pay that is available. You are not having to pay your liability insurance and that's most of the time, it depends on your jurisdiction. But in addition to that, you've got worker's comp coverage should you happen to fall off the trap table, which I don't recommend. And you've got the opportunity for disability insurance to do, you get sick while you're working. If I become an employee who sets my work schedule, not a whole lot should change.

There's a couple of nuances that that um, we have in our studio now. My goal with trying to get in front of the state legislature is to have an understanding of how we work. Like I said, as an industry, oftentimes teachers set their own schedule, they decide they want to work Monday, Tuesday and maybe really load up there Wednesday because they want to take Thursday off. And I'm okay with my teachers doing that as long as they're experienced, certified, perhaps licensed in some way. So the difference would be, at least in our studio and this and the studios that I'm helping go through this process. As I'm saying, when you have a younger teacher that maybe hasn't completed their certification or they're newer to the work, that's the kind of person that we would consider a nonexempt employee. Meaning I need to put them on a shift and I pay them an admin rate so they have a prescribed shift. When they see a client or teach a class inside that shift, I might give them a little per diem bump for that hour where they're seeing a client or teaching a class, but for my more experienced teachers, I'm letting them set their own hours. For the most part, I'm asking them, I have a client at four o'clock, I know Sally that you're not teaching typically at four o'clock on a Tuesday.

Would you like to take this client and she has the choice to make that decision for herself. That said, it's really up to each individual studio how they want to pay their teachers and how they want to schedule for their clientele in their classes. Thinking about the compensation here, who sets the price at which that teacher sells their services to the client? It's always been really up to the studio. I think for the most part, unless currently right now you are a renter in a studio, meaning to me that defined as you come in my studio, you work at absolute center, you collect your client money and you pay me rent. So that's a renters model, which by the way, after January 1st of 2020 will not be around, but it's no different now to where it was in the past where the studio for the most part, since the prices and also sets the compensation, my recommendation is that studios create a cohesive compensation model that the employee understands very clearly and it's based on certification years in the industry, continuing education, maybe total client hours that they're working in the studio. It really needs to be clearly laid out, so the imp now employee has a path to work along and a goal that they can set for themselves to move along this compensation path.

You mentioned a little bit earlier that some people were exempt employees and non-exempt employees. There's such confusing terms. Can you explain what those things mean? So, as John says, exempt and nonexempt employees, they're still employees. So sometimes we hear the word non-exempt or the term non-exempt and we think, Oh, we're exempt from the law. But what this case means is a nonexempt employee is someone that works at a restaurant say or um, at a data entry job where they have a shift and they are mandated to have certain breaks and lunch breaks.

And if they go over their set time, they have to be paid overtime, which is time and a half double time for holidays, that sort of thing. So that's the definition of a nonexempt employee. Now if you're like most Pilati studios, we don't work in that way. Right? So the, the prevailing wisdom is, and I'm going to use that term because there's still not a full understanding of how this plays out in our industry when it relates to the, to the state ruling or the state law. But the prevailing wisdom is, is that most of our teachers who are experienced and certified or athletic trainers who are licensed, could be considered professional employees and therefore exempt employees.

And that means they are not subject to the break requirements. They're not subject to me having to pay lunch for them. They're not subject to overtime because for the most part, they control their schedules and control their work and they're paid more than double minimum wage per hour. So another example of that is, um, I'm gonna use a massage therapist and maybe a yoga teacher. And this sometimes happens in the plots world, but a massage appointment can be one hour, it can be 75 minutes and can be 90 minutes.

The same thing with a palati session. It can be a private, it can be a duet. So we have these differing pay rates and different times, right? So that, um, and our understanding again is that is, uh, an exempt employee because they're being paid by the piece, right? So you and I are given a dress and we're told we're going to get paid $7 when this dress is finished and it takes you 30 minutes and it takes me 45 minutes. We still get paid $7 even though the time is different. We're getting paid by the piece. So that's relevant to our industry. And that's one of the things that I want to have the state understand and modify the language to allow this latitude of having exempt employees in most of our businesses. So we're not tied to, I mean, I can't imagine telling my 75 year old client that she now has to come in at 10 15 because my employee has to have a 15 minute break.

I don't know about you guys, but I don't think it's going to work. Not in my studio. As a newly hired employee at a [inaudible] studio, I will, I still need to pay for my business license. You shouldn't have to. So as an employee, you're part and parcel of the studio or the place that you work. So the studio or the studio is duty bound to get the license if it's required and it's jurisdiction and it's duty bound to follow the rules of that jurisdiction. For instance, I'm in the Bay area where I'm from there.

Different cities have slightly different requirements for sick pay and how that's doled out for health insurance coverage, um, for sexual harassment training. Those sorts of things. But you as an employee really can come to work. Do the job, like you did not be burdened with your self employment tax at the end of the year or your liability insurance or your business licenses. Yeah, I'm a [inaudible] teacher and presently I work at about three studios. Does that mean I'm an employee of three different places? It could be. Um, I was a restaurant employee with actually two different restaurants at one time.

So that's not unusual. And the fact that people work in different studios doesn't automatically make them independent contractors even if they have their own business license and maybe even own studio. I know of a case where somebody is a graphic designer and a [inaudible] teacher. In that case, could she be an employee and a contractor for that company? Yes. So we had that use case ourselves. We um, had a person who we hired as applaud his teacher and we discovered that she had great web design acumen and graphic artists and social media at acumen.

So those three things were not integral to our business. So we could bring her in under contract for those three jobs, the web design, the social media and the graphics while running alongside her being an employee for us as a [inaudible] teacher. So in that case, she got a w two from you and a 10 99. Yeah, I imagine she had to have an accountant. I don't know. As a contractor I'm used to kind of doing things my own way. Um, now as an employee, will I lose some of that freedom?

You may, it, it depends on the relationship that you have with the studio right now. Right. So there's, um, lots of studios where they allow people to come and go as they please and, and they don't interfere with their work in any way. And if the studio chooses to continue in that fashion, it will continue that way for us. Like I said, we, we knew that we wanted to create a consistent client experience for the people that came in our door. And we also knew that we wanted to have our clients as clients of absolute center and not as clients of Claudia or Louise or myself, we have from personal experience understood that at any given time somebody can be gone, even if they're owners. So to be able to create that model where our clients understood that you might work with Amy one day and you might work with Rudy another day, we all worked as a team together and had a clear understanding of the overall mission of the studio. And I think it, it made for a better client experience, but it's really up to the individual studio to make that decision for themselves.

Presently, a lot of [inaudible] teachers feel that they own their client. Um, and as a contractor you can kind of see why they feel that way. But as an employee, is that ownership going to change? It's not going to be any different. I mean, our business is a personal business, right? So we, we have relationships that we've established with people, and similar to what I talked about with the, the Stu being a client of the studio versus a client of the teacher. The reality is that teacher still has an investment in that client has an investment in the teacher. Now, could someone that left my employer stand right outside my door and solicit my teacher or my clients? They could.

We don't have any non-compete rulings in California. There are some States that allow for that. Most of those States don't mandate that you can't compete. So there's a choice as a teacher to sign that agreement or not. But most certainly in California, we cannot demand that our employees not compete with us.

In other words, you can't go down the street and open a studio, guess what they can and they can take our clients. So it behooves the studio owner to create that comradery, I think so that you have a team that relies on one another, so you don't create that anchor text where someone's going to suddenly want to leave and take your people with you. But there is no ownership. No, no rules about that. If at a, as a contractor, I'm paid say a certain amount per hour, should I expect to be paid the same amount per hour as as an employee? Again, it's up to the studio. What I'm recommending that my studios do that I'm, I'm shepherding through this process is that they share the burden of this additional, um, expense with the employee. So I recommend it usually cost between 18 and 20% over and above what you're paying by the hour to bring on an employee.

That's what we call the employer burden. Um, and if you share that with your employee, they're coming out ahead because like I said, the sick pay, the benefits that they get from worker's comp and disability plus the fact that the employee is no longer having to pay that self employment tax and the write offs that they would have had as a contractor in the past, they no longer have. So when you kind of go down the rabbit hole of doing the math, most employees make out a little bit better or maybe quite a bit better than they did even when you reduce their hourly pay. But it's really up to the studios and and having them create an understanding of what they need to have to survive as a studio. What they need is margins and they make the decision of what they're going to pay. So just as a hypothetical here, if the studio owner, the employee wanted to pass the entire burden of this extra cost to the employee, then the contractor that becomes an employee should expect about a 20% cut in what their hourly rate is.

Right. And I'm not recommending that. I don't think there's too many people out there that would accept that. I'm suggesting sharing that burden. So anywhere from nine to 10%. So if you're making $20 an hour, I might reduce your pay to $18 an hour to share that burden. And the employee, when they calculate that through, they might actually see that as a slight increase in their take home.

Exactly. Exactly. At the end of the year. Plus you don't have to pay your quarterlies like you do. I don't know about you, but I wake up in the middle of the night and think, Oh my gosh, did I send that check off to the IRS? And they don't pay their quarterly is because their employer is withholding that money and paying those taxes to the government for them. Exactly. That's exactly right. I, I talked to various studio owners and their margins are pretty small.

Um, you know, how to is, is it going to be a necessity to pass some of this, um, extra costs through to the customer or would you, you know, do you think they'll be able to make it without, with just a say a 10% reduction in the cost of their PyLadies teachers? Yeah. How, how's this gonna work out? You know, it depends on so many factors. You know, what's the overall burden for the studio? Are you paying, you know, a warehouse price for your rental of 80 cents a square foot? Are you paying $4 a square foot in a prime location? So every business has to examine their own numbers. And I'm, I'm a big fan of making sure that you run your key performance indicators and you're looking at them every month and that you as an owner, if you're working inside your business, maybe you're not actually paying yourself as you would a regular employee, but you're tracking yourself as if you were a regular employee.

Cause like I said, speaking from personal experience, I've had two of us, three owners go out with health challenges from one day to the next day we're gone. And I need to replace them with teachers. I actually need to pay. So to me it's a very, it's a viable business when you know that everyone in the studio is being paid, even the owner, as if they're a teacher. If your margins are running that thin, that's where you need to really rethink, do I need to change my pricing? Do I need to change my model or is this really a viable business? Do you think this, uh, legislation is going to put some Pilati studios out of business?

Boy, I hope not. I mean for me, I want to make sure that I can do as much as I can and I know you feel the same way. That's why we're doing this talk to allow studios to have a full understanding of how this works and to be able to find the resources that they need to guide them through this process. I can be one of them. You can find accountants, HR consultants, um, attorneys that can help with this. But I would like to see us come together as a, as an industry and support each other. I think we do a really good job of that already. Part of the reason we do that well I think is the [inaudible] anytime and the [inaudible] method Alliance and certainly mind body help to get us together as a wellness industry.

This is an important industry that's vital to the survival of our civilization. I think to be roundly honest. So you know, Pilati is teachers get in this work because we have a passion for it, but there really has to be a full understanding that you're in business. You're not just opening a job for yourself. So, even if you haven't done it to this point, if you can use this as an opportunity to really marshal your forces to move forward in the, in the industry as a strong viable business, there's lots of support opportunities out there to do that. And I don't think it really necessitates that you have to shut things down. I'd be sad if that was the case.

You know, I, I've met some of these teachers that are truly free spirits. Um, I have a feeling that they're going to say, I just don't want to be an employee. I don't want to be tied down. Do they have the choice of just, no, I'm going to stay as a contractor. Do they have that choice? They really don't unless they want to open their own studio. Um, I've had a similar conversation with a number of yoga studio owners where they, I, I have this teacher that's been a teacher for 35 years and there's no way he wants to be an employee. Well, he has to be. Um, and it at that point sometimes it's a bit of a sales job on the part of the studio owner to the employee.

We had a little bit of a pushback when we made this change from one person and we negotiated back and forth a little bit. I did up her pay offer a little and there was still a little push back and I finally said, there is no choice for us. We're going to change this model because I want to make sure that I'm here next year and the year after that in the year after that. So you need to decide are you onboard or not? And maybe you're not, maybe it's not right for you. And that's okay. I understand. The other part of this that I didn't mention is that this is also an opportunity for you as a studio owner to look at the landscape of the team that you have and, and maybe make the decision that there might be one or two teachers that you may not want to make an offer to when you change over to employees.

So you as a studio owner have that choice. But unfortunately, if you're going to work in in a studio now the studio really has to have you as an employee. If I have my teachers all as employees, let's say I have somebody who's really not performing very well, does it make me harder to terminate that relationship? California is a that will state, and to be truly honest and safe, you have to try to mentor that teacher through the challenges as best you can document this, go as you go along. There are certain HR compliance rules that best practice to follow. And then lastly, if you need to let someone go, it shouldn't be a surprise to them.

You should have at this point coached them through what's going on and given them opportunities to change and giving them feedback as they go, as to whether that change is being met or not so that when the parting of the ways actually happens, it's not a surprise to that employee. If it is, you need to turn the lens back on yourself as an employer and examine why didn't this employee understand what I was trying to coach them through. Uh, in the case of an employee that you were to terminate, would that employee be, um, eligible for unemployment insurance? They could be, it depends on a, whether they file, um, be on how, how far out it is that they file. But it's a possibility and it also depends on what the cause was for you letting them go. A lot of the [inaudible] studio owners I know of really, really busy people. Um, if they're unable to comply with this law by the 1st of January, 2020, what's going to happen?

So it's not like the doors of the EDD or the IRS are going to suddenly open an outcome. All these different auditors to come and pray on our studios. But I will say the, the burden of noncompliance is pretty onerous. So if you are audited and found to be wanting, so to speak, you can be liable for up to both sides of the tax burden, both the employees and your burden up to three years back. Um, in addition, there can be fines for nonpayment and those kinds of fines. And, um, tax, uh, levies are something that you can't file bankruptcy to get away from.

They will stay with you for the duration of your life. Sorry, I'm interrupting here. But by that, do you mean that they're personally responsible for that? Absolutely. Yeah. Um, and you can't be, my understanding is you can't be shielded from that as a corporation. Somebody has to pay that employee burden. But it's our understanding, and I mean ours by the HR consultants that I spoken to, the accounting professionals, the attorneys that I've spoken to, that there's some latitude if it can be shown that the business is working toward accomplishing this task in the next six months to a year.

So it shouldn't be that you are descended upon right away in January or February. As long as you can prove that you're working toward this goal, you should be completely fine. So what should I be doing right now? If I'm a [inaudible] studio owner, what would be your advice on what are the next steps? So there's a number of different ways you can go. Um, I've had people that, the studios that I've worked with rely completely just on me. I've had studios take some advice from me, take some advice from attorneys, take some advice from HR professionals, and I've had one studio that I had an hour meeting with who's doing it all herself. So it took, it took several years for me to fully understand what I need to do and to be able to keep on track and ahead of what is coming down, um, from on high that I need to do as an employer. For instance, a random blog post informed me about the new sexual harassment training, um, compliance that we have to go along with. In addition, there's something new called Cal savers, which is a state mandated retirement program that you can avail your teachers of if you don't have a retirement program. To be really honest with you, I don't think it's a very good choice, but those are the kinds of rules that you need to keep abreast of.

And whether you use an HR consultant, a studio consultant like myself or even a payroll company to help keep you ahead of the curve when it comes to these new rulings and to shepherd you through this process. That's a decision you can make as a studio owner yourself. But my advice is to get started right away. I understand the ongoing costs of this legislation, but this transition from contractor to employee, these kind of setup fees. Can you give, I know it's a really hard question, but can you give any kind of guidance about how much that is typically costing our [inaudible] studio? Well, it kind of depends on which Avenue you use. Um, I've had some studios pay a little minimum fee to an attorney for an hour visit up to thousands of dollars to change their model completely. Uh, I charge about $1,500 to get you through the whole program. And that includes templates of onboarding and, um, job descriptions and offer letters and manuals and handbooks and all that.

A lot of that stuff you can generate on your own. Um, HR consultants can help you with a lot of this. There's some interesting nuances to how we work as PyLadies teachers specifically and that we need to create a little bit different language in some of our manuals about touch and certain terms that we might use in the course of training an employee or teaching a client. So those kinds of things are nuances that most HR consultants understand. I certainly understand because I'm a studio owner. Lawyers I don't think would have a clue, but I would say, you know, in addition to the 18 to 20% additional cost for bringing on employees per hour, there's maybe 50 to $70 per month in payroll company fees.

And I highly recommend a payroll company and maybe anywhere from 300 to $2,000 in professional fees in the form of attorneys or HR consultants of some sort to get started. Thank you Katie. That was really interesting and I think will be very informative for the people who are watching. Uh, we'll be taking in touch with Katie and as this law becomes clearer exactly how it's going to be implementing, then check back to [inaudible] any time and we'll be posting more videos and blog posts as we learn more about this legislation. Thank you very much, Katie. Thanks for having me, John. I think it's important what you're doing and I appreciate it. Thank you.

Comments

PhysicalMind has been planning for the employee  change for ten years. Smart studio owners are implementing  special classes with retail  attached. The 80Bites w Parasetter® is a. Tunnel into Ft.Knox. Club Pilates will. Impact  all markets and selling service alone  is not going to be viable.
Amy
I have my own private practice. Thank god for that.
1 person likes this.
Very valuable information in this conversation, thank you John and Katie!
Outstanding conversation! Thank you for bringing this information to our community.
Very helpful Thank you
Very informative. I’ve been searching online for this exact information and haven’t found anything as clear and easy to understand. Happy that Pilates Anytime chose to break it down and explain it thoroughly. Thank you!
Honestly this was the most helpful information I could find on the subject. So frustrating having to make these changes without notification or guidance. THANK YOU

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