Types of Employment for Your Production Company
As a small business owner, there are many factors to think about when hiring new team members in order to bring your company towards it's goal. According to Forbes.com, the projected number of small business in the US stands at 33.2 million; an insane number to think about! However, every one of those business are not the same. I'm here to talk about the different types of employment that a small production company such as mine can employ.
A friendly reminder that I am not a legal tax expert nor a business/financial advisor. I write this article in hopes to share my knowledge and experience from a more approachable viewpoint.
If you seek professional expertise on the topics mentioned above, I recommend reaching out to advisors near you. If you live in the state of Pennsylvania, I recommend this site to find business experts near you:
The IRS and Types of Employment
Above all, the factor that determines the identification of your employee is based off of how they are managed at your company. Thus, the identification of employment reflects on the annual taxes a company must pay (such as payroll taxes), benefits the company is required to give (such as pensions), and specific earnings (such as hourly or annual salary).
The IRS declares specific tax laws regarding the identification of employees, so it is crucial to understand the difference between the status of how people work for your business. If not, your business may end up paying tax penalties that may cost you a little more than budgeted.
Within the entertainment industry, there are three common types of employment that should be familiar to every production company.
Full-Time Employee
This is by far the most common type of employment in a company. Everyone who has worked in some sort of business understands the term full-time and part-time. Here we will be talking about full-time employees and how they can benefit the production company.
Full-time (FT) employees are exactly what it sounds it. They work full-time, generally between 35-40 hours a week. Depending on the business structure, they can work Monday- Friday on location, Hybrid, or even receive a 4-day work week. The company that hires the FT employee will file taxes via W-2 forms.
Employees who are FT are committed to the company as that this the only job they are currently focused on (aside from freelance, hobbies, and other activities your employee is involved in). FT employees can be dependable, trust-worthy, and well-rounded since most of the time they are involved with the companies success.
For a production company in the entertainment industry, FT employees often work in the administration, business, financial, and other logistical branch of large entertainment houses. Accountants, assistants, coordinators, project managers, and branch directors are often FT employees due to the on-going work that is constantly in need of their management.
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Independent Contractors
On the other hand, independent contractors are just as common as FT employees, but on a different spectrum.
The IRS define independent contractors as "self-employed" and must file their own taxes on their behalf. Commonly, the independent contractor will file a 1099 form for their service to be taxed properly. This is considered freelance work, and depending on your location, different tax laws may apply. To be sure, seek a tax attorney or a trusted accountant for more accurate tax advises.
Although you are not guaranteed benefits like a FT employee, being an independent contractor has it upsides as well. When working as an independent contractor, you are working on your own crafts and skills. Compared to being a Full Time Employee, independent contractors can work (as the name suggest) independently to bring new materials for the production company. They negotiate terms, construct a contract, and a baseline pay with the employer (or producer) before their work, and agrees to do the following tasks under that contract.
A great example of an independent contractor in the entertainment industry are the musicians. A lot of independent films do not have the budget to hire and keep a full time musician in their production company. Therefore, they resort to a wide outreach and hire a musician who can record, compose, and perform a musical piece for the film.
Since the production company needs the musician for a specific job, it is wise to hire the talent an independent contractor rather than a full time employee due to the nature of the job. As you can assume, actors and different talents can fall under the same category.
The production company must hire with caution, however, since the IRS writes clearly what determines an independent contractor from a full time employee. Failing to properly disclose the two may result in some penalties as different tax laws apply to each position. Reference the IRS website for the distinction of the two position.
Internships and Externships
The last option is opening internships and externships for collegiate students in the surrounding areas to gain a hands-on experience while obtaining course credit at their university or college. This is a very popular option for production companies where budget is tight and they need extra help.
While some companies do, it is not required for companies to pay interns. However, giving some pay to your interns and externs shows that your company respects their hard work and their willingness to learn hands-on. Come companies may provide incentives such as travel reimbursements, or provide a monthly pay of a few hundred dollars. Personally, I do think interns should be compensated because like any other employee, they have to be taken care of equally.
The main difference between an internship and externship is that with an internship, there is usually an academic reasoning involved. On the contrary, an externship is an opportunity for a young professional to be involve in the professional process of their career by shadowing or helping out with daily task with or without pay.