Is your Virtual Assistant an Employee?

The answer to this question is most likely, “No”. A Virtual Assistant in most cases is that of an Independent Contractor, not an employee.

An Employee is someone that you hire, pay payroll taxes to the government on their wages, including unemployment taxes. You’ll also need to have Workers Comp and will deduct payroll taxes out of your VA’s wages. The benefits of hiring someone on an employee basis is control… you as the employer have direct control on When and How the work you submit is completed. An example of a VA working on an employee basis is if the VA works full time for one person, and does not have any other clients.

An Independent Contractor is essentially a freelancer and entrepreneur. You do not pay payroll or unemployment taxes on this person’s wages and you do not deduct taxes out of their wages. You also don’t need Workers Comp. Instead, you pay the VA their rate, and they are responsible for paying taxes on it. You are responsible for sending them a 1099 at the end of the year if you paid them over $600 for that year.  You submit your work request and the Independent Contractor VA will complete it according to his or her schedule. Of course, you would have an agreed upon timeframe, but you would not control exactly when and how it is done.

Just because you 1099 your VA does not guarantee you are classifying them correctly. Nor does having them sign a contract guarantee that either. Instead, it is the conditions of the employment arrangement that determines the correct classification.

This is an important distinction to understand for several reasons. One is to clarify and set expectations. It is important to understand that if your VA is an Independent Contractor, they do have other clients, and work will most likely be completed on a first-come, first-served basis. There will be projects ahead of yours, so the more organized you are and the more you plan ahead, the better. Sending a project on Monday morning and expecting that it will get completed early on Monday is likely an unreasonable expectation. Conversely, if your VA is an employee, then you can definitely direct that item to be completed Monday morning.

Another reason why this distinction is important is for legal reasons. Some entrepreneurs do not understand the legalities, so incorrectly classify their VA as an Independent Contractor. Or some unscrupulous entrepreneurs will do this intentionally to avoid payroll taxes or complying with other fair labor regulations such as overtime. This is not a good idea for obvious reasons; not only because you don’t want to get in trouble with the IRS but you could also be susceptible to penalties by the Labor Board of your state (certainly in California). Those penalties can be steep.

The bottom line- be sure you are legally classifying your VA correctly and manage your expectations based on that.

This of course, is not intended as legal advice, merely to alert you to the distinctions so that you can research the best option for you and your business. If you’d like to learn more, here is the explanation from the Ca. Labor Board:

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