David Schwartz
Running a successful apartment community is never a one-man job.
Behind every popular complex are usually many players working to ensure new tenants are coming in and existing tenants are being adequately cared for. Managers, maintenance technicians, leasing agents, and assistants all play integral roles in keeping things humming.
Just like any other type of small business owner, you must determine whether hiring full-time employees or independent contractors is to your best benefit. While most of us think we understand the difference between the two, our actual understanding is often incomplete.
Contractors vs Full-Time Employees for Apartment Staffing
In layman's terms, an employee is someone who works on salary and an independent contractor is someone who is paid an hourly wage. Simple, right?
Except, according to the IRS, this definition is incorrect. The U.S. government clearly defines an individual as an independent contractor if “the payer 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.”
Obviously, this implies a distinct disadvantage to the employer and a desirable advantage to the contractor. The employee is entitled to a certain amount of autonomy that regular employees are not. They can expect more negotiation in pay, flexibility in hours, and more freedom in how they get work done than staff. Unfortunately, that means less control for the employer.
But there are also many advantages to hiring contract workers for apartment landlords. And, from what we’ve seen, the pros often far outweigh the cons.
In this article, we’ll make a case for why avoiding full-time staffing could save you money and actually yield more flexibility in the long-run.
You Have Fluctuating Needs
Undergoing a major transition? Whether it’s something external, like building renovations, or something internal, like adopting a new data management system, independent contractors (ICs) are perfect for periods of uncertainty.
If you know you need extra help, but just aren’t sure how long that need will exist, ICs are your best bet. Hire on full-time employees now and you’ll risk having to pay unemployment if you need to let them go when things slow down. As an added bonus, ICs are often specialists who can come in and create change quickly.
For example, say you know you want marketing support during the first quarter—someone to help build business during the slow season—but you also would like to provide your apartment manager with some long-term administrative support. Instead of looking for the magical unicorn who can do it all, you may want to hire a marketing specialist for a short period of time. Meanwhile, you can look for the perfect administrative assistant. Put simply, you’ll have greater flexibility with ICs.
Someone Isn't a Good Fit
No matter how hard we try to find “the right person” for the job, sometimes the wrong one slips through the cracks. Maybe it’s just a personality fit or maybe someone just isn’t catching on quick enough. Whatever the case may be, firing employees is cumbersome. Which is why many employers prolong the process, even when they know it’s not working out. There are many reasons for this including not wanting to have an uncomfortable conversation and not wanting to begin the time-consuming process of finding someone new all over again!
Couple that with the added possibility of someone suing for wrongful termination and it’s no wonder things get drawn out. Obviously, holding onto inefficient or problematic employees is NOT good for business. The satisfaction of your staff sets the tone for your entire organization: A happy staff = happy tenants.
Conversely, if an IC isn’t working out, you can simply not hire them again (once your agreement is complete). What a relief.
You Have a Small Budget
Whether you’re a small complex or are simply saving for major purchases, you may not want to pay the various expenses associated with full-time employees (i.e. benefits, equipment, medicare, social security). All together, these extraneous payments can easily increase payroll costs by 20 to 30 percent.
Though contract workers appear more expensive at a glance—often rightfully charging more per hour—they actually end up costing much less. And, as you know, having a "rainy day fund" to deal with building surprises is ALWAYS a good idea.
The Cost of Carelessness?
We work with a lot of multi-family properties, and there's always frustration with getting work done efficiently. In a lot of cases, not every case, maintenance crews are working to get a job done as fast, and as cheap as possible.
For instance, water leaks are something that we encounter on a daily basis. Many times, the leaky toilet or dripping faucet could have been solved during installation. In some instances, the installers didn't notice the leak or drip, or just didn't think it mattered.
Those drips and leaks add up to thousands of dollars per year in larger properties.
That's why, in certain instances, hiring a contractor ensures better work, and also brings in a liability partner if something wasn't done right.
In our case, a lot of properties bring us in to install The Water Scrooge system, but also have us check for leaks, monitor their water usage, and we have even receive requests to install new toilets under the NYC Toilet Replacement Program. In doing so, we have saved our clients an average of $500 per unit per year. And now, we are on a retainer basis as a contractor to maintain and monitor their toilets and water usage to make sure everything is working like it should and to track savings.
In most instances, that level of care is not something you get from on-site staff. They are overworked, and undertrained to be efficient in all areas. And from our experience, the impact of a contractor in the right circumstances can add up to big benefits.
How are some of the ways you've found contractors to be beneficial, or in reverse, a detriment? Share them with us in the comments.
